Level Up Your Operations With Win-Win Vendor Relationships

October 9, 2018 8 min read

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Did you know that the Boeing 747-8 has over six million parts? Can you imagine the mayhem that would unleash if even one of those parts became defective at 30,000 feet in the sky? It gives me the shivers!

One of the biggest challenges of running operations on large projects is finding hundreds, if not thousands of reliable vendors, ensuring the product they give you meets your quality requirements, on time, consistently, and maintaining relationships with them so your product can be assured of an always-on support system in the form of a supplier network. So how do you do all of that? 

Aim for the long term.

Too many business owners have a use and throw policy with their vendors. Every vendor is only as good as the price they quoted last. Unfortunately, playing musical chairs with your vendors is the surefire way of crashing and burning your operations when an unreliable vendor goes AWOL. A smarter strategy instead is to go with the long haul in mind and work at your vendor relationships accordingly.

This approach starts with astute vendor selection. Shortlist only those vendors who have shown a strong track record of being able to deliver on time and with the correct quality parameters your product or process needs.

Related: 4 Keys to Choosing the Right Vendor

While encouraging new ventures is great, you’d probably be wiser to go with established vendors than newer ones, if only to ensure stability and reliability for your processes.

There are many benefits that come with a long-term, win-win vendor relationship. For example, you can negotiate low prices if you’re going to promise the vendor consistent business for the long term. Dealing with established vendors’ teams is easier and more efficient as both parties know exactly what’s expected and what problem areas to watch out for. Long-term vendors tend to be more flexible with custom orders, if you happen to miss a payment you can still depend on your vendor pulling through with nary a complaint.

Invest in supplier management software.

With most companies dealing with multiple vendors at any given point in time, it can be a tough prospect to stay on top of all vendor relationships at once. From ensuring a project is moving along fine to checking on inventory levels, to sending a quick note to your vendor, vendor management demands a whole set of skills that most professionals sorely lack.

Enter vendor management systems. A good vendor management system will straddle the gamut of all vendor-related activities from inviting bids or RFPs, to supplier evaluation tools, and even project management options. Whether a paid platform like ProfileGorrilla or a free, open source one like OpenLMIS, take your pick among the various options out there and invest some of that budget into a system that will bring order to the chaos of vendor management.

Understand your vendors’ business and clientele.

Continuing with the long-term theme discussed above, a good vendor-customer relationship is not monopolized by the customer. It’s equally important for you, the customer to empathize with suppliers and vendor partners. Eighty-seven percent of CEOs surveyed by a recent State of Workplace Empathy study reported that workplace empathy is directly linked to better productivity, business performance, and retention.

Related: Cultivating Relationships With Vendors Opens a World of Opportunity

It’s very likely that your company is simply one of many businesses that the vendor serves and this fact can sometimes affect the service you receive. Understand this fact and cut your vendor some slack every now and then, especially if their slip up is a rare event, and not a daily occurrence. Acting as if you’re the center of your supplier’s universe can often be damaging to your own processes as well as your relationship with the vendor.

A long-term vendor often ends up privy to a lot of insider info about your business. It’s important therefore, that the information they gather over time does not pass into the hands of your competitors. Stay on top of your vendor’s client list. Even better, make them contractually bound to not work with your competition, to protect the sanctity of your own business data.

There’s another, more positive reason to keep up with your vendors’ clients. Since your vendor and you are part of the same industry, there is a chance that another client of your vendors might be a good potential customer for you. With a solid partnership and history of success behind you, you’d be well placed to receive a strong recommendation from your vendor and bag new business with relative ease.

Negotiate a win-win agreement.

A good agreement is never one that leans blatantly in your favor. That’s coercion, and is guaranteed not to last long. A good agreement is fair and balanced, leaving both parties feeling equally satisfied with the outcome.

Ensure you spell out every aspect of your service expectations with crystal clarity in your agreement. Include details about quality requirements, different methods of quality control you plan to adopt, timelines, penalties and more. On the other hand, make sure you also commit to payment schedules, training programs, testing schedules, and the like.

Related: Your Success Is My Success: How to Build Thriving Client-Vendor Relationships

Most importantly, make sure you devise your own way to store, retrieve and manage your vendor agreements easily. After all, you don’t want to be left scrambling to locate an agreement a week before it’s up for renewal or when a potential conflict rears its head. I like the idea of adding metadata to your agreement documents to help organize them more efficiently. Instead of listing vendor agreements alphabetically or by date of signing, you could create groups of agreements based on what they have in common.

For example, marketing vendor agreements could be grouped under tags like “digital marketing,” “events,” “influencers,” etc., HR vendor agreements could be grouped with tags like “recruitment,” “payroll,” “training,” and so on. This can help you pull up contracts and agreements whenever you want to recheck the scope or take a business decision that might affect your existing processes, deliveries or logistics.

Constantly evaluate processes and results.

No, I’m not contradicting myself. No matter how much time and effort you may have spent building up a relationship with your vendors, don’t let familiarity trap you into working with below par suppliers. Research from McKinsey shows that being locked into sub-optimal contracts can lead to losses equivalent to 9 percent of annual revenues for some companies. That’s not pocket change by any stretch!

Invest in developing a system of annual contract reviews. Since your original contracts have already spelt out your SLAs (service level agreement) at the outset, any deviance from the agreed terms can be grounds for dismissal or at the very least a reprimand.

No process is foolproof and no vendor is infallible. Be on the lookout for processes or steps that your vendor or you employ that may slow things down or are causing unnecessary bottlenecks. Share results with your vendors to ensure that they know where they stand in comparison to all your other vendors and get a chance to improve their output.

Share market knowledge.

Vendors that perform best are those that have been trained well on your company’s systems and processes. Keeping them in the loop about things like a new expansion to your factory or winding up of an existing product line helps them plan their own processes better.

However, knowing how your internal systems work is not enough. It’s equally important for vendors to be aware of what’s going on in the market and adjust accordingly. Things like a new industry regulation that applies to your business is something a vendor or supplier would need to know as well. When they’re are prepared in advance for such external events, they are less likely to mess up the products or services they offer you.

Related: prepare for regulation.

Take technology giant IBM, for instance. At the time of writing, the IBM Blogs page hosts 35 different blogs on a variety of topics ranging from IBM’s flagship AI product Watson and its offshoots to a careers blog, a troubleshooting blog for all IBM Kenexa vendors and users, an “Insights on Business” blog and more. The company’s blogs are not just a branding or marketing tool, they reach out and present valuable information to potential job applicants, vendors, existing customers, employees, as well as consumers at large.

It’s all about give and take.

In today’s fast paced business environment, no company can hope to make it big all by themselves. A strong vendor network that can be trusted to deliver the goods on time is critical to your business’s success. Given how important vendors can be to your organization, offer your vendors the respect and flexibility they deserve, and you’ll end up developing a reliable network and support base that can be counted on when it really matters.