Vendor Management

Vendor management is a discipline that enables organizations to control costs, drive service excellence and mitigate risks to gain increased value from their vendors throughout the deal life cycle.

Vendors play a key role in the success of your business. Using sound vendor management practices to build a strong relationship with your vendors will strengthen your company’s overall performance in the marketplace. Ignoring these sound vendor management principles will result in a less than effective relationship that will negatively impact your business.

Don’t Focus on the price

If your goal is to get the best price and not the best product or service, you will strain the relationship. Your vendor will offer less services and most likely a lesser quality product  or Service. Put your self in the vendor shoes, Would you like your customers to demand better prices that are below your cost? You probably will try to get the business however, quality and service are compromise and eventually the customer experience is affected.

Understand the parameters

Try to understand the parameters of the relationship with the vendor. Restrictive or exclusive relationships just don’t work. For example, limitations with other vendors or with future customers. In addition, contracts that have severe penalties for seemingly small incidents should be avoided. If the vendor asks for an extremely long term contract, you should ask for a shorter term with a renewal option.

On the other hand, as you expect the vendor to satisfy your needs, you should be open to the vendor’s requests also. If an issue is small and insignificant to you but the vendor insists on adding it to the contract you may choose to bend in this situation. This shows good faith on your part and your willingness to work towards a contract that is mutually beneficial to both parties.

Audit Performance

Once the relationship with the vendor has begun, don’t assume that everything will go according to plan and executed exactly as specified in the contract. The vendor’s performance must be monitored constantly in the beginning. This should include the requirements that are most critical to your business. For example: shipping times, quality of service performed, order completion, call answer time, etc. Monitor performance. Are certain practices costing you money?


The key to a successful vendor Relationship  Communication! Be proactive, Don’t assume that the vendor knows your business. A well established and well maintained line of communication will avoid misunderstandings and proactively address issues before they become problems. Be clear. Don’t try to mask your intentions that will lead to mistrust.

Have a Back up Plan

If the vendor does not live to expectations or does not comply with the agreement, it is time to make the change. Don’t put all your eggs in one basket, keep your eye open. Always strive to get the best vendor for your products or services.