No business is an island — they rely on customers and vendors. Whatever market segment you serve, it is highly unlikely that your organization can fulfill its mission without a little help. Virtually every company depends on a supplier in one form or another. Whether you need a partner to source vital components, provide additional capabilities or fill gaps in the knowledge base, vendors are a critical part of your operations. Those in the electronics purchasing and supply chain industries understand this all too well; they deal with a large number of these relationships every day. Although the experience can be seamless and efficient when it works, any bumps or glitches could lead to big problems.
Vendor management is like any other type of relationship: It requires an honest effort from both sides in order to make it worthwhile. For your vendors, that means living up to their promises. For you, it requires hard work to ensure your partners understand what is being asked of them, and then doing what is necessary to help everyone succeed.
However, all relationships come with challenges, and your connections with suppliers are no exception. Read on to learn more about the process of vendor management, how it works and what you can do to encourage mutual benefit and progress.
Understanding the vendor management process
There are three basic steps to establish positive relationships with your vendors. The first is to identify and prioritize your business goals. When you fully and clearly understand what the organization wants to accomplish, you will have a baseline from which to compare providers who could be best suited to realize those objectives. This phase also involves creating explicit, precise metrics to evaluate progress. If suppliers know what success looks like to your company, they will be better equipped to meet or exceed your expectations.
Once you define your organization’s goals, the next step is to categorize them based on need. This will help you determine which areas require the most support from third parties and which can be deemed non-essential. You only have so many resources at your disposal, and sinking time and money into a partnership that doesn’t contribute much value is often a bad idea.
Finally, after securing the necessary vendors to meet your company’s goals, the most important step is to manage your interactions with those suppliers on a regular basis. Spend some time evaluating how well they have performed — are they fulfilling their contractual obligations? If you see inconsistencies or weaknesses, consider whether your company is helping or hindering their efforts. Then, have a frank discussion with your partner to iron out the kinks.
The benefits of properly managed vendor relationships
Following the aforementioned steps can help put your enterprise in a much better position with providers. When these relationships are managed properly, you may enjoy benefits such as a wider selection of vendors, more leverage for negotiations and potentially better rates.
Another advantage is that you can get a clearer idea of which connections work for your company and which do not. When you know what you want from a supplier, it is much easier to see where they are succeeding and where they are coming up short. Similarly, you can learn from each relationship where you could be more accommodating or forthright with communication.
Carefully managing your vendor base could ease the experience for all parties. Do not “set it and forget it.” If you pay close attention, you could avoid miscommunication and other sticking points that can sour the relationships and ultimately hurt the business.
No matter how well you manage your vendors, there are bound to be some stumbling blocks along the way. To help mitigate the risks they pose to your operations, it is mission critical to identify these problems and prepare appropriate reactions.
For example, keeping the lines of communication open could prevent a number of issues, including mistakes due to misinterpretation, lack of clarity or frustration. Be sure to check in with your partners on a regular basis and confirm that everyone is on the same page. In many cases, simply knowing that there is an open avenue for discussion can put people at ease and keep tensions from developing.
Another common issue that arises when dealing with outside suppliers is online security breaches. Allowing external access to your network, even occasionally, can open the door to issues if proper measures are not put in place.
Very few companies have the luxury of handling all aspects of their business in-house. Working well with your third-party providers, therefore, is absolutely essential in order to get the most value out of the relationships. For more details about the vendor management process and other challenges you may encounter, check out the accompanying infographic. It contains a wealth of tips and statistics that can provide you with a solid foundation for your supplier partnerships.