The importance of vendor management can’t be overstated. Not only does it play an important function in choosing the right fit for your business needs, but it will ultimately reduce disruptions, improve operations, and ensure deliverability. While there are many different approaches to achieving this, these concepts can provide a practical roadmap for vendor management.
Vendor vs. Partner Relationships
In the corporate world, many people use the terms “vendor” and “partner” interchangeably. However, there are distinct differences between the two. Vendor relationships are purely transactional. When you go into business with a vendor, you are hiring them to provide a service or product. The communication tends to be more one-directional, and efforts usually cease once their side of the contract has been fulfilled.
On the other hand, true partners immerse themselves in the relationship and become an extension of your organization. They go to greater lengths to understand your culture and corporate structure. It facilitates much better communication in both directions, resulting in greater collaboration as well as constructive feedback to identify ways to improve. Business partners are committed to a long-term professional relationship because when you succeed, so do they.
Defining Roles Within Professional Relationships
The first step in vendor management is to determine whether the professional relationship is limited to contracts and service agreements or if both parties are working towards a shared vision to drive mutual success. This will also make goal setting simpler since you can better define the best practices and overarching policies you need to meet your objectives.
Defining the individual roles will also allow for more efficient interactions and less confusion. A crucial step in achieving this is by streamlining communication and ensuring that everyone receives the same message. Therefore, it’s wise to identify key executives as the best points of contact and foster a relationship built on transparency and accountability.
Evaluating Business Relationships to Drive Success
Vendor management strategies aim to design more efficient processes and ensure that you receive the full value of the services you are paying for. There are several ways to approach this problem, but here are a few that have seen the most success.
Paid to Performance Models
While this is a common way for HR departments to motivate their employees through incentives, the same model can be applied to vendor management. By evaluating these relationships, you can recognize and reward excellent performance and service. A stacked ranking of partners is an effective way to illustrate the status of your connection, create greater motivation, and offer additional opportunities to those that outperform the competition.
Incorporating the Right Tools
To do a job well, you have to have the right tools. The same holds true when you are auditing your vendor relationships. Luckily, there are several online platforms that can store, track, and manage all aspects of these interactions. You will gain a better understanding of your relationships through an integrated view, which will allow you to more thoroughly assess performance and achieve better results.
True growth comes from self-awareness. Although it is important to identify what is working well, you also need to take note of areas of improvement. And many times, this comes by improving your relationship with the vendor. So, you need to ask yourself:
- Are both sides willing to share challenges, strategies, and ideas?
- Is there alignment throughout the entire operation?
- Are you open to constructive criticism and responding to their feedback?
The answers to some of the questions may be difficult to hear. But ultimately, you have to remove the emotional element to obtain an objective assessment of operations. And in the end, everyone will be better for it.
The Purpose of Vendor Management
The purpose of implementing strategies for vendor management is to create an environment that helps you find the ideal solutions and partners, not just short-term suppliers. But, building successful partnerships takes time. P3 knows that true partnerships rely on trust and the ability to reflect on performance and outcomes. That’s why our consultants strive to not only meet but exceed our partners’ expectations.