Vendors are at the core of the procurement process of every organization. Many companies, however, continue to ignore the value of maintaining a good relationship with their vendors. Such acts of incompetence may have made little difference as procurement played an administrative role in an organization’s purchasing of goods/services.

Management of suppliers is also a key competency of effective organizations. In a global marketplace that is ultra-competitive, companies need to look for innovative ways to gain more value from suppliers while at the same time reducing risk and retaining efficiency. Management of vendors enables you to establish a partnership with your suppliers and service providers which will improve both companies.

With efficient vendor management processes in place, you can better-set targets for performance, efficiency, expense, and satisfaction, and identify and manage third-party vendors that will help you achieve those business objectives.

What is Vendor Management?

Vendor management is the internal framework of an organization to negotiate with outside vendors and suppliers. It enables third-party vendors to continue to evolve through regular cooperation and continuous monitoring. The partnership between the company and vendors is one of the main factors and creating an efficient framework for dealing with them would lead to revenue-boosting.

Vendor management system is also a form of risk management- a key vendor’s activities are capable of either a financial decline or a profit boost. Daily vendor audits and checks will avoid the entry into financially unsound vendor relationships. It includes working as a team with your vendors to draw up mutually beneficial contracts which will eventually benefit both companies. It prioritizes developing a long-term partnership with the vendor over short-term profits.

Overall, the management of the Vendor partnership deepens buyer-supplier relationships in order to achieve a mutually beneficial objective and create trust.

How to manage vendors effectively?

Communicate

Bad communication is the root of the majority of company failures. The failure of your suppliers to communicate or obtain essential information will end up shaking the very foundations of your vendor management operation.

This is especially important in terms of timelines. Corporate buyers need to meet regularly with their vendors in order to efficiently relay their requirements and get a better understanding of the capabilities of their suppliers

In any partnership, the best way to create an ill will is a lack of contact. Take the time to connect with your vendors, and in return request the same form of outreach.

Build Relationships with Vendors

Getting out of a transactional partnership and into a strategic supplier-buyer relationship model is the secret to productive vendor management. The first step of the cycle is to consider the suppliers as worthy partners.

You need to take a systematic approach to develop and sustain relationships with your best vendors to get the most value out of your vendor management process. Good suppliers are difficult to get through, so it’s important to maintain your relationship with the suppliers that you don’t want to lose.

Instead of merely sharing the predefined KPIs with your suppliers, include them in crucial strategic decisions such as setting specific goals for the partnership. Vendor management makes long-term partnerships a priority over short-term benefits and marginal cost savings. Changing vendors constantly to save a penny here or there will, in the long run, cost more money and will affect consistency.

Focus on win-win agreements

Negotiations should be based on good faith and honesty and not on strong-arm tactics. You’re not going to be able to establish ties with methods of strong-arm negotiation. Instead, you’re going to generate frustration that can lead to more down the road issues.

Focus on reaching agreements in good faith which will help all parties to walk away feeling good about the agreement. Partnership goals should be organized in such a way as to provide fair incentives for growth and support both businesses.

Risk Management

Third-party risk assessment is an important element in dealing with vendors, especially as a result of recent federal rules and guidelines on a company’s liability when hiring a third-party vendor. Due to rising public concern about cybersecurity and data breaches, this form of risk management is particularly relevant these days.

Whenever you enter into a contract with an outside vendor, you need to minimize risk. Require your vendors to explain what data they are going to need to access and how exactly they are going to secure the data from disclosure, and make sure they live up to a fair standard of protection before you contract.

It is mandatory to regularly scrutinize the inner workings of vendors, especially those with strong-level access to confidential information. Audits and assessments shall be performed to assess their long-term suitability for a relationship.

Measure Vendor Performance

As your marketplace operator, you don’t just source vendors, and let them be on your website selling digital goods on their own. Monitoring how the vendors are doing is really important, too. Therefore, from time to time you can run various reports to benchmark and compare the vendors and find out what works, what doesn’t, and what are the best practices that might make all the vendors sell more.

If you consider vendors who are underperforming, first review vendor profiles if all the required information is present so that they have a well-established reputation that can be seen and noticed by your clients. The next move is to search the listings of its products. Are the explanations of the goods correct and the items well presented? Does the question lie with the seller or the systems in the event of problems? Is Brand Listing Easy? Are there enough fields of knowledge to present the goods to the full? You could also boost and refine the navigation and interface of your website which will certainly enable your vendors to get a sale.

Promote your Vendors

Advertising and supporting your vendors along with their goods can be a good way to get tourists and help your vendors sell their products in various social media networks, such as Facebook and Twitter. Note, if your vendors earn, then you earn, so helping them sell their goods is in your best interest.

Writing blog posts about vendor products will help you generate additional content for your web page as part of your digital marketplace marketing campaign, and give your vendors another forum to promote their goods. Make sure, however, that the articles to be published following the appropriate quality standards that you need to maintain for your blog.

Provide Vendor Resources

It will become an ongoing activity to work with vendors and to help them market their goods. You will need a mechanism to help your vendors as well. Initially, vendors will have a lot of questions because they will have to understand how to work with your digital product marketplace and what to do to earn money.

It is, therefore, best to follow a constructive strategy, in order to foresee their questions. One way to do so is to send out a series of informative emails upon the sign-up of new vendors. The goal is to help suppliers complete their product listings and then inspire them to list more quality items on your digital product marketplace in a second phase.

Benefits of Vendor Management System

The benefits of establishing successful and sustainable partnerships with vendors are untold. Vendors or suppliers of the products and services of your business are some of your essential business partners and as such, a concerted effort must be made to build an effective vendor management system, capable of optimizing the current company and vendor relationship.

• Boost the level of services you have
• Boost operating and/or financial performance
• Reduce expenses
• Expand your product usability
• Concentrate on the main market functions

Vendor management is essential to the company’s economic well-being. In order to streamline operations, an efficient vendor management system must be developed at the company.

Conclusion: Good Vendor Management is vital for your success

In today’s world economy, where regional and economic boundaries are increasingly decreasing, companies will collaborate with different types of vendors from around the world. Even if you deal with a single vendor, successful vendor management is important, because their success ultimately affects the success of your company.

It is important to understand vendor management’s advantages and challenges, so you can develop an efficient process that will drive your interaction with your vendors. Do not forget to add vendor management best practices to your method to ensure that your vendors provide optimum value to your organization.

Only make sure to always invest in a robust and comprehensive vendor management system and you will be ready to create efficient, strategic relationships with your suppliers while streamlining your workflows and keeping costs down. With automation, total accountability, increased collaboration, and integrated cloud-based data management, the team will be able to break free from low-value activities, gain more strategic sourcing through better insights, and ensure the company is agile and fleet-friendly enough to succeed in today’s dynamic economy.