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Vendor Management Best Practices for Business
It does not matter if you are a small business or a large enterprise, vendors will always be a vital part of the success (or failure) of your organization.
That is just the way it is. It is just more practical to outsource some of your needs to a third-party provider than to spend money and effort to do it on your own. It allows you to focus on what you do best, which is to produce and sell your product or provide your own service.
However, dealing with multiple vendors can be complicated and you may end up with vendors that are not right for your business just because you failed to manage them properly.
That is why it is important that you are aware of vendor management best practices.
Vendor Management Best Practices – What is Vendor Management
Working with multiple vendors can present a lot of problems to a business. It can lead to a lot of miscommunications and misunderstandings if not done right.
Vendor management refers to the process of initiating and developing relationships with third-party providers for goods and services that are essential for your business. The goal is to manage these vendor relationships in the most organized way possible to keep everything in order.
To help you achieve that organized vendor management process, here are some best practices that you can follow:
Vendor Management Best Practices No.1 – Know What Your Business Can Do and What it Cannot
Before you even look at any vendors, it is important that you look within yourself first. What are the things that your business can do and what it cannot? You have to weigh whether the choice of doing something yourself is worth the cost, time, and effort it requires versus the option of paying somebody else to do it for you.
If it is worth doing it yourself, then getting a vendor might just be a luxury expense that your business does not need. If it is too costly and time-consuming, however, then maybe it is time to look at third-party providers to fulfill it.
Vendor Management Best Practices No. 2 – Research Each Prospective Vendor Carefully
You want to scrutinize each individual prospect carefully. Do not get easily impressed by glitzy presentations and salespeople. While it is important that you listen to what they say, it is also important to listen to what they are not saying.
Make sure that you ask the right questions like their capability to meet your business demands, the materials they are going to use, the penalties for not meeting parameters of the agreement, and more. You know your business and you know what you need. Make sure that the providers you shortlist will be able to meet it.
Vendor Management Best Practices No. 3 – Be Wary of Restrictive Contracts
There will be vendors who will try to get you to agree to terms that will restrict your business in different areas. Some will try to restrict you to an exclusive partnership that will limit your ability to work with other vendors. There will also be vendors who will try to get you to sign a long-term contract to secure your services, tying your business to them for a long time.
It is not that these terms are bad or unlawful. However, it only works if you get something in return because your business will be sacrificing a lot by signing these terms. Maybe if they give you a good deal or if you have already established a good long-term relationship with them, then maybe you can bend to their terms a bit. But in general, you should stay away from vendors that demand exclusivity from the get-go.
Vendor Management Best Practices No. 4 – Monitor and Evaluate Vendor Performance
Vendor performance should always be evaluated and measured. Set up key performance metrics that will allow you to objectively measure if the third-party provider is meeting the terms of the contract you have agreed to. If the numbers are less than desirable, then you can take action against your vendor based on what was agreed upon if they are not able to meet service level agreement.
thinkIT Solutions Vendor Management System
To make your vendor management process easier, look to thinkIT Solutions for a professional but easy-to-use vendor management system.
This online dashboard will provide your business with a central hub where you can manage vendor relationships from acquisition to evaluation and payment.
For inquiries on how thinkIT Solutions can help you manage multiple vendors, contact us now at (504) 608-1132!