How to Manage Vendor Relationships as a New Business Owner
Have you ever clashed with someone? Not in the sense of throwing down gloves and fighting, but perhaps not seeing eye to eye on something that caused tension between you and another individual.
Probably, right? It’s natural to not always be on the same page. However, when this happens in business, it can be detrimental to your company. For that reason, it’s extremely important to focus on working closely with vendors and suppliers to ensure you are working as a cohesive unit.
Here are 10 strategies to consider and implement into your vendor management to strengthen your partnership. After all, if you succeed, they succeed — it’s mutual.
1. Choose Your Vendors Wisely
It should go without saying, but you need to choose your vendors wisely when you have multiple options. Sit down with them and go over expectations, what you need, what they need, the terms and pricing, and then weigh out all of the pros and cons.
You want to be able to grow with your vendor, not have them hold you back or vice versa. If you don’t feel comfortable with someone, move on in your search.
2. Understand Your Vendor’s Business and Operations
To help improve your vendor relations, it is wise to understand the business and day-to-day operations of your vendor. How do they run their business? What constraints do they have? How many other businesses do they work with? How do you fit into their portfolio?
The better you understand their business, the more insight you will have into what they are and aren’t able to do and whether or not they can meet your needs.
3. Create a Win-Win Situation for Everyone
Focus on making your partnership beneficial for everyone. If you squeeze the life out of your vendor and demand they reduce their prices and margins, they aren’t going to enjoy working with you. Find a common ground where everyone agrees upon pricing and all parties are happy with the margins they are making.
The goal is to strengthen the business of your vendor while doing the same for your own. If you help grow your vendor’s business, they may be more willing to help you on pricing.
4. Communicate Regularly
In order to have a great relationship with your vendors, you need to communicate with them regularly. This keeps the lines of communication open so that nothing falls through the cracks.
Regular communication can help project capacity to make sure you can fill your pipeline without running out of stock on an item. Your vendor can also relay information to you if a problem arises so you can work together to find a solution.
5. Set Expectations
Expectations need to be in writing for all parties to abide by. If costs are set and terms stated, they need to be followed. If a vendor sets you up as NET30 terms, you better pay within that 30-day window.
There also needs to be penalties when obligations are not met. For instance, your vendor may charge you a certain percent for every day you are late on a payment. Putting it all out there at the very beginning helps set the tone and structure for the working partnership.
6. Create a Contingency Plan
Having no set contingency plan for when the unthinkable happens can royally damage vendor relations. You and your vendor need to sit down and communicate what will take place when something happens.
Perhaps a run of your product doesn’t meet quality assurance. Or maybe a snowstorm shut down the entire city and your delivery can’t go out the door. How will your shipment get to you in time? Plan things out so you don’t need to figure out a plan of action on the spot.
7. Build Trust
Working with a vendor is like working with your spouse. You need to have a foundational trust between parties. If you always think they are doing something to spite you, more times than not your relationship will be torn apart and you’ll be looking for a new vendor (whether they fire you or you fire them).
8. Share the Risk
If your business is driven by physical products and you use a vendor to manufacture them for you, you need to share the risk. For instance, if you are working on forecasts to give your vendor a heads up on the demand you project, both of you need to share the risk involved.
This means their risk is that you will take all of the inventory they produce for you and get paid, while your risk is that they will produce everything on time and the quality will be what you expect.
9. Pay on Time (Or Before)
If you want to destroy your vendor relations, don’t pay them on time. That’s a great way to have them stop working with you. Have you ever not been paid on time? Did you have to chase them down to get paid? That’s time you could have spent growing your business.
Be on time with your payments or even early if you have the funds and want to reward your vendor.
10. Treat Your Vendor Relations Like a Marriage
Working with vendors takes time, patience and the ability to listen. In a nutshell, it takes WORK. Spend time with them a few times throughout the year to sit down and build your relationship.
Find ways to make your vendor relations better. Is there something you can do? Is there something you’d like them to do? Figure out what it would take to form a long-lasting relationship between you and the vendor so that both of you can mutually benefit and grow.