What Is Vendor Relationship Management? Why Does It Matter?

Vendor relationship management is the set of data, technology, and processes a business uses to develop relationships and create a cohesive ecosystem with vendors to achieve their business goals. 


Now that may sound esoteric, so let’s talk about a close comparison: customer relationship management.


CRM as a parallel


Although more people are familiar with it, customer relationship management is the set of data, technology, and processes a business uses to determine what actions they take in a consumer relationship. sound familiar? CRM has evolved a lot over the past 50 years:


In the 60s, you would see salespeople sitting at their desks with a corded phone in one hand and rifling through a set of index cards called Rolodex in the other. On each of these cards was a detailed list of contact information, customer and company names, and relevant details about the person you're calling on the other end of that line, whether they were a current customer with a contract in place or a potential customer called a prospect. The information that the cards held could make or break a business relationship with their customer.

Flash forward to the 90s: the same information that you would see in Rolodex got moved over to spreadsheets. At this time spreadsheets were being saved on local computers, and often they were confusing or difficult to navigate because they had all the information laid out in a non-intuitive table format. If you weren't the one who wrote the spreadsheet, it was nearly impossible to find what you were looking for. Moreover, tracking client communications, whether by email or phone, was still labor-intensive.


When we finally moved to the 21st century, the idea of hosting all the information about customers in its own standalone application, with all the information, the touchpoints, the emails, the calls, everything you do with the customer in one place, came to life. CRM was born and companies that are massive today like Salesforce. CRM has become analogous to talking about a set of software; nearly every company in scale uses a CRM without 83% of the Fortune 500 using Salesforce alone.


As B2B evolved with the internet, CRM started to include using software to find new customers via online directories. More and more people were using LinkedIn and ZoomInfo, transitioning from phone books and even some word of mouth. Effectively, making technology a part of almost the entire CRM experience.


You’ve covered CRM, but what’s the implication for vendor relationship management?


Vendor relationship management hasn’t seen the same level of development in terms of technology that we've seen in customer relationship management. Moreover, the adoption of technology that has been developed has not been happening as quickly as standard CRM platforms.


Right now, within the vendor relationship management space, the most ubiquitous technology has perhaps been on the pure supply chain side with software such as ERP and WMS solutions. For reference, an ERP (enterprise resource planning software) keeps track of inventories and supplies and allows you to effectively purchase any goods that you need to come in through your system and use them in your day-to-day operations. WMS (warehouse management system) is a similar piece of software to keep your warehouse running, coordinating with the ERP system to keep all the warehouses in sync and running on time.


More recently, there have been advances in risk mitigation software, helping you realize when to diversify your supply chain and potentially helping you identify when your current vendors cannot complete the orders that you ask them to For example, these new systems can detect when vendors may be under heightened risk from damage due to natural disasters, letting you make contingency plans ahead of time.


While ERPs, WMS, and risk management systems help you automate communication and data analysis for ordering supplies, managing inventory, and mitigating risks, vendor contacts and nearly all vendor information are still usually kept in an excel spreadsheet. Unfortunately, this means if you ever need to contact vendors for order details or get additional information about a vendor, you must go through a tedious excel combing process. Moreover,  vendor lists usually contain more vendors than you  use, meaning that you may be ignoring a vendor right under your nose that could give you a deal. 


Similarly, finding, identifying, and vetting vendors as a process has not seen a lot of development and is extremely tedious. Most of the time new vendors are found using Google or by word of mouth, limiting the potential options that a company could realistically find to produce their goods, especially if the industry is niche or is not that technologically savvy on the whole, as there’s a risk that their website is not perfectly indexed into search engines.


 OK, I get how VRM exists today and I know what it is but why does any of this matter?

Supply chain and vendors are becoming more important, especially as we've seen supply chain disruption happen throughout the world during 2021-2022 pandemic. Having positive relationships with vendors ends up being the backbone of your business; it’s not something that you notice when things are all going well, but as soon as something starts going wrong with a vendor, it can immediately derail everything. At the end of the day, having positive relationships with as many suppliers as possible and especially investing in key supplier relationships is crucial to success. Like other beneficial software, VRM enables key benefits, including:


1.     Allow for more stability in the business by being connected to more vendors and better communicating with current ones

2.     Encourage potential cost optimization and pricing transparency

3.     Organize and streamline a supply chain and procurement, processes enabling higher productivity (similar to CRM)


At Parq, we’ve made it a mission to cultivate vendor relationships: creating a repository with which buyers can organize their current vendors and enabling a platform for buyers to expand their vendor network to individuals that they may not have seen before. There's a lot to do in vendor relationship management, and we have strong conviction in our values to take the steps to make our supply chains sustainable for the future.

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