Many businesses around the world offer the same or similar services and products. Companies need to step up their game with an attractive pricing & product strategy that will pull more customers towards the business and not lead them to competitors. One method to reduce prices & improve quality is optimizing vendor relationships.
When it comes to B2B transactions, a business owner needs to know the price ranges available from different vendors, the quality differences in product, and potential risks in lead time. You need to build a good relationship and an effective strategy to get the best prices, services, and products from your vendors. In this article, we will discuss some of the steps to find, retain, and work with great vendors.
Beware, this going to sound a lot like a personal relationship guide…because in many ways, finding a great vendor and finding a great friend or partner is the same.
When you're looking to find the best suppliers, make sure that you have gone above and beyond to find all the reliable and credible vendors in your area or niche.
As a benchmark, you should identify three or more vendors before you start to seriously consider moving forward, especially if you’re in a commoditized product or services space. Remember, for almost all of us, price, quality, and turnaround time trump everything else. But it’s hard to see differences in these metrics if you’re not talking to enough people.
Google is the most broad-based way to find vendors for any industry, but for your vertical, there may be directories (e.g., for food manufacturing there’s a directory of manufacturers)or software that will give you better contacts in the industry.
Vendors are the backbone of your business. And the ones you pay thousands of dollars can make or break your business. Hence, if you find potential vendors you want to work with, and you’re planning to spend a lot of money or hand over a sizeable chunk of your operations, it’s crucial that you onboard them as quickly as possible to maximize vendor value.
Vendor onboarding usually consists of a lot of “admin work”. You have to sign contracts like NDAs to prevent pricing collusion, get vendor payment information through W-9s, and onboard vendors onto any relevant tools (again, using food manufacturing as an example, connecting a food manufacturer into a Quickbooks portal).
On the flipside, vendor onboarding lays down the foundation of your business relationship. This initial process should be an opportunity for you to learn about your vendor’s vision for the partnership and share your own company’s goals. And of course, it’s a great time to level-set expectations.
To set yourself up for short-term and long-term success, a simple, but impactful, onboarding process is tantamount. I’ve seen success with using software like DocuSign for “paper pushing” and setting up onboarding meetings in tandem to clear questions and discuss strategy.
With the vendor onboarded, you’re ready to order from them! Often, you’ll kick out an RFQ (Request for Quote),which gives all details of what a buyer wants to purchase from the vendor. This is a vital part of the process since getting a quote from the vendor is how you will compare prices and check which is the best option for you.
The old school way to request a quote is to be straightforward and to the point in a table format. Fields in the table should include the product you want, the quantity you want, and the deadline for the quote to come back. More recently, requests for quotes are often automatically completed by filling out a form on a website. Remember, when vendors start giving you quotes, you can always request a discount!
Analogous to discounts, now is also the best time to ask for vendor samples and trials. Note that, especially in the manufacturing space, samples will usually cost some money and set upcharges (again, using food manufacturing as an example, it’s not uncommon to see a minimum of $5-10k for a sample run of food).
If you’re working to source technology, usually your vendor will provide a “limited” trial for a predetermined length of 2 – 4 weeks.
You’ve selected and bought from your vendor based on the quotes. But the work is just beginning: the buyer and the supplier must have a relationship where they understand each other. Importantly, they should be aligned to the same set of results.
Like any relationship, there are tricks to make a buyer-supplier connection work well in the long term.
Like any relationship, communication is key. For keeping in touch with vendors, there are the basics: whenever deadlines change or orders need to be updated, hop on the phone with the supplier or shoot them an email. But beyond that, if your vendor is a strategic partner, it’s important to keep them clued in on your company’s strategy. It allows the vendor to plan for what will happen in the future and make your interactions smoother.
There’s a more recent tendency to make business interactions transactional. Which is great for speed, but not good when you want to maintain relationships and call-in favors. So when you find a vendor you like, send business their way and visa-versa. It’s the corporate version of “making friends when you don’t need them”
Equally as important, make sure you’re talking to the right stakeholder. You may be thinking to yourself that finding the right person to talk to is trivial; but over the years, turnover will eventually rear its head.
As a quick anecdote, in a prior life, we had to, unfortunately, go through and schedule a layoff. After that happened, we couldn’t contact 5-6 vendors we needed to because there wasn’t the right set of contact information in our excel spreadsheets. The people who had kept in contact with the suppliers were laid off.
Keeping track of all the details that go into managing vendor relationships is tough. But there’s a burgeoning field, vendor relationship management software, that makes it far easier. Kind of like a CRM for vendors
Hopefully, you found this article informative, and you’re off to the races. Keep in mind, not all vendor processes are the same. Usually, the more money you pay a vendor or the more they are involved in your operations, the lengthier the onboarding process will be. Moreover, as you begin to scale, more stakeholders will want a say in what vendors you work with (like legal, finance, and eventually procurement), so be alert.