Vendor Management 101

Vendor-Management-101

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Most businesses use a variety of vendors to fill skill gaps within their company,  in fact many of the vendors used are critical to your day to day operations.   Vendors include services such as computer and IT support, bookkeeping, or even a graphic designer and writer. Many are key parts of your supply chain, so it’s critical they are well chosen and well managed.

Bringing the right players to the team:

Choosing the right vendors and service providers is just as important as hiring the right staff.  This is not a step that should be taken lightly since the product or service that your vendor supplies will also represent your brand and business. Create a list of things that are requirements, and a list of things that would be nice to have. You can even create a list of must nots as well. Now you can use your list to evaluate your vendor options.

Score your vendors based on how many requirements and must haves they check off and deduct points for any must nots – unless they are complete deal breakers, then remove that vendor from your list entirely. Once you have your top 3 you can further evaluate them. This may include detailed proposals, visits to their locations, and even requesting references from their other customers. Once you determine who you’d like to work with you can negotiate terms, pricing, etc. and have a contract created.  

Now that you’ve determined who you’ll be working with, you’ll need to set up a process to manage your vendors. Here are some key things to keep in mind.

  1. Communication. As with many aspects of your business, keeping the right people up to speed and involved on a project, can help ensure you meet your delivery date. If your due dates change, your supplier should be one of the first people you notify if you are waiting on deliverables from them to complete the project. Know up front how you prefer to communicate, what your expectations are – again avoiding gray areas will make everyone’s lives a lot easier.
  2. Know their process. If you plan to work with your vendors for years to come, understanding their business, policy, and procedures is just a smart move. You’ll have a better understanding of how they manage their lead time and how much flexibility they have with delivery dates. Knowing their challenges when it comes to them delivering your product or service can better help you plan for your own customers.
  3. Diversify. Don’t put all your eggs in one basket. Having only 1 vendor for specific items or services is a nightmare waiting to happen. If your sole vendor has a major disruption like a natural disaster or something like a fire that shuts down their production for an undetermined amount of time, this could be devastating to your business if you don’t have alternative suppliers.  What is your plan b?
  4. Think long term. While saving a few dollars in the short term might seem like a great idea, having to constantly find new vendors can end up costing you money and hurting your reputation in the long run. Having a vendor who can handle your needs as you grow can far outweigh the idea of saving a few hundred dollars.
  5.  Be honest. It’s not always the vendors fault. Be accountable in the process if your decisions caused a delay in the delivery date. Making changes to the order or delayed responses to questions can have an impact on the supplier’s ability to do his or her job well.
  6. Make it a Win-Win. Yes, your vendors are there to provide a service for you, BUT if it’s not mutually beneficial for them, then they may not want to continue to work with you. Just like with any good partnership, sometimes it takes some compromise.
  7. Pay on time. If you want your vendor to be consistent, you need to pay on time. Your vendor could easily put any current and future orders on hold due to delayed payment, or they may put their other customer’s orders ahead of yours if you are a constant late payer.
  8. Set up a tracking system with KPIs. You should be monitoring your vendors performance with Key Performance Indicators. Typically, the most important data to track is on time delivery and the quality of work/product. This gives you the information you need to make vendor related decisions. It’s important to always have the data should you need to make any decisions about continuing a relationship with your vendors.

At Litchfield Bancorp, we know how important running your business is to you. That’s why we do more than just lending. We offer a suite of services to make your business run more smoothly and efficiently. Check out “The Perks” of working with us and feel free to call or stop in to any of our branches with questions.

Margret K. Warner
Vice President, Commercial Lender
Director of Business Services
860.393.9151

Author: Margret Warner

Margret Warner started her career at Litchfield Bancorp in 2000 as Branch Manager in Washington Depot and has subsequently served as Branch Manager of the Litchfield office, Business Development Officer and is currently a Commercial Lender based in the Watertown market. With over 25 years of banking experience, Margret brings her extensive knowledge of the financial services industry to area businesses. Margret resides in Torrington and is committed to the communities where she works and lives as a member of the Watertown Rotary and advisor of Leadership NW. In addition, she serves on the board of the Watertown/Oakville Chamber, the United Way of Northwest Connecticut, VNA Northwest, Inc., and the NW CT Chamber of Commerce. She is a graduate of the esteemed ABA Stonier Graduate School of Banking, and holds a BBA in Accounting from Hofstra University.

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