When your business is just starting out or is small in size, you need as much help as possible. This is why your relationship with vendors is so critical. Hiring outside contractors to handle crucial elements of the business means less weight on your shoulders and a better chance of satisfying customers. However, as much as you would like to “set it and forget it,” handing a portion of operations over to a third party comes with a certain amount of work. Vendor management is a key component of your everyday responsibilities. It is worth your attention even though it means devoting less bandwidth to other tasks.
The Vendor Management Process
The key to successfully managing your vendors is to have a strong process in place. Most businesses follow a three-pronged approach. The first element is to analyze your business goals and prioritize them. This often involves establishing metrics to evaluate progress.
The next step is to segment those goals in terms of how important it is to have strong vendor support for them. You should consider categorizing vendors in terms of critical, significant or nonessential.
Once that is completed, the final phase is to manage your stable of vendors. This can be the most challenging aspect because it means being vigilant and cultivating relationships.
When all of these aspects are functioning as they should, you can have a network of providers that will reduce costs, mitigate risk, optimize supply chains and improve overall quality of service.
Overcoming the Challenges
No matter how strong your processes and relationships with vendors are, there are bound to be some bumps along the road. Whether these result from miscommunication, substandard work or pure accident, they can have a domino effect that negatively impacts all elements of your company. Identifying these issues and understanding some common mitigation strategies goes a long way toward inoculating a business against vendor mishaps.
For example, incomplete documentation can lead to headaches when you and your provider have a misunderstanding. This can be avoided from the start by having specialists draft iron-clad contracts that leave no room for ambiguity or disagreement.
Sharing information between sources may lead to security breaches if one side is not careful. Upgrading shared software platforms and implementing additional security measures can be instrumental in preventing this.
If the supply chain is not functioning at optimal efficiency, it may be necessary to expand your vendor base. Off-loading non-core processes such as inventory management and order fulfillment can streamline this aspect of the operation.
Of course, the biggest problem you can have with a third-party solution provider is a poor working relationship. The only way to solve this is to communicate openly and honestly. Juggling an assortment of partners to help manage responsibilities is vital if your business is to gain a foothold in the marketplace.
For more tips to understand and master the vendor management process, take a look at the accompanying infographic.
