So what the heck is vendor management and supplier performance? Is procurement just about the item, the price and delivery? And who owns the responsibility anyway? Before we can determine how we measure up, first we must understand what the heck we are talking about.

When you work in this field it is easy to overlook that most people have no idea what we are talking about, their eyes simply glaze over and it’s so easy to lose their attention. How many times have I heard “it will never happen to us” or “we are a small business and we don’t have those levels of bureaucracy” or something to this effect? Unfortunately this means that vendor and supplier performance managers tend to be the ambulance at the bottom of the cliff whereas we are the people who generally understand the business needs and issues, have a deeper understanding of the external market place, its trends and dynamics and an appreciation for the effect that clarity of expectation can have on developing solution strategies, value chain mapping, cost structures, supplier capability and the contract that binds all this together.

Vendor management enables you to build relationships with suppliers and other service providers that will strengthen both businesses. Vendor management is not about bullying or pushing for the lowest price possible. Vendor management is about constantly working with suppliers and other service providers to come to an agreement that is of mutual benefit for both businesses. Vendor management considers risk profiles, reduces conflict, encourages cost efficiency, builds valuable teams and importantly enables informed decision making by the business and win-win negotiations. It’s about being business savvy not massive layers of bureaucracy.

Our Tips for Success

1. Share information and priorities
If there was one single most important message it is this, please share with your suppliers all pertinent information and priorities especially if it’s key to the success of the job. Enabling this information transfer at the right time means that all parties are better aligned to the final outcomes and any problems are identified in advance. To complain after the fact when you didn’t make your expectations known from the outset is disconcerting for everyone involved.

2. Build partnerships for the long term
Building long term relationships with suppliers enables a platform for trust, access to expert knowledge, preferential treatments. Vendor management encourages these types of longer term relationships with suppliers as it mitigates the cost and risk associated with constantly changing between suppliers in order to save a few dollars here and there. Changing suppliers will ultimately impact your business in the long term with service degradation, quality impacts and finally the lack of consistency will soon see the supplier plying their trade with more reliable business partners.

3. Balance competition with commitment
Gaining the commitment from suppliers is a key priority for successful vendor management. On the flip side though is gaining the commitment from stakeholders within the business. This is not to say that supplier pricing should be accepted without question as seeking competitive bids should always be an option available, however stakeholder commitment and support of supplier strategies is key to the overall success of the supplier relationship and future engagements.

4. Understand key drivers for your suppliers business
We are all in business to make money and this is no different for your suppliers. If your strategy is to constantly lean on them to give you a discount or cut their costs, do so in the knowledge that sooner rather than later something will suffer, you will likely notice a general reduction in time and effort the quality goes down and your perceived value drops. A key deliverable for vendor management is the knowledge, resource and expertise that helps contribute to suppliers serving you better. Asking questions of your suppliers helps to develop a better working relationship and an understanding of what is important to them. Refer to point 1.

5. Allow key suppliers to help your business strategise
Being in business means actively seeking a competitive advantage and providing customers with a value added service, so consider inviting key suppliers to participate in the parts of your operation you don’t have the expertise in or where they may be able to provide valuable insight on doing things differently or better. Seeking different opinions is a great way to learn and grow and great suppliers thrive on this type of opportunity. Collaborative relationships can be a win-win for everyone.

6. Negotiate for win-win agreements
Great vendor management conducts negotiations that are completed in good faith. Good faith means with propriety or honesty. When negotiating clarify any grey areas that would be otherwise open to  interpretation and seek to ensure all parties collectively accomplish their goals.  As a supplier there is nothing wrong with being transparent with costs if it means winning the business and if you or your company happen to be the customer on this occasion remember strong arm negotiations result in short term gains as sooner or later the relations breaks down and one party walks away from the arrangement.

7. Agree on what value means
Many people have heard the saying ‘you get what you pay for’. Most often the lowest price also means the lowest quality. Vendor management will help the business determine what value means; this could change over time but on each occasion vendor management will focus on quality for money that is paid or in other words the perceived value to ensure the two are aligned and the value benefit is quantified.

8. Pay on time
If you make an agreement on certain payment terms stick to it, and if for any reason you need to renegotiate make sure you communicate that before the deadline. No surprises! Paying late just leaves a sour note and damages the relationship.

So how do you measure up? Does your business need to make changes? Ultimately steps taken that open the door for mutually beneficial relationships with suppliers and being smart in business is what vendor management is all about. How can we help you? Call us today on NZ 0800 464844 and ask us about our RISK FREE services.

Cathy has more than 20 years of experience across a wide range of disciplines including Service Delivery, FMCG, IT, Banking and Telecommunications having worked with major New Zealand and dominant global organisations. Outsource management, cost saving and contract management strategies are areas she is both professionally and personally passionate about.
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