Before the pandemic, business owners were already beginning to recognize the value of investing in strong vendor relationships. A survey from Tech Pro Research reported that 47% of respondents are managing more than 10 vendor relationships at once. Recent supply chain delays caused by the pandemic revealed that the quantity of these relationships mattered less than the quality.
“If you had asked anyone in the industry what their biggest problem was at that time, they likely would’ve said a lack of communication with their supplier,” wrote the procurement experts at Fairmarkit.
Strong vendor relationships help businesses mitigate risk, save money, and run more efficiently. It’s worth investing more time and energy into building partnerships with a few key vendors rather than bringing on more. Here’s how to do that.
Start off on the right foot
The relationship begins before you even start reaching out to vendors. Lay the groundwork for a strong partnership by considering why you’re purchasing the item or service you need and what your expectations are for the vendor you wish to work with. For instance, if you’re simply buying office supplies, price will probably be your highest priority. But for something more high tech, you will need a more sophisticated list of criteria before you vet different vendors.
“During the vetting process, be sure to check references and benchmarks, so you have a deep understanding of not only the item you’re buying but also the company supplying it,” wrote Fairmarkit. “All this information will make you better informed to make your choice and will help build a richer relationship with your supplier.”
Consider your vendors the same way you do your employees
Traditional procurement takes a standardized approach to working with vendors. That means comparing invoices, confirming delivery and quality expectations, and sending the payment. This approach works for purchasing goods and services, but it’s less useful in building a relationship with a service vendor or gig worker.
For these types of vendors, Harvard Business Review recommends treating your partners as you do your employees. Think about what will motivate them to go above and beyond to help your business.
“How do you get the most out of your employees? If feedback and mentorship works, do that. If taking them to lunch once a month motivates them, try that,” wrote HBR.
[Read more: 5 Business Practices That Build Strong B2B Relationships]
It’s worth investing more time and energy into building partnerships with a few key vendors rather than bringing on more.
Create win-win opportunities
Look for ways to align your business priorities so that as your business grows, your vendor also succeeds. One way to do this is to be transparent about your business goals. Share knowledge and resources that will help your vendor understand your needs.
Likewise, ask your vendors for insight into their business. “Maybe you can recommend them for new business opportunities and contracts or create a joint scheme that will promote both your plans,” wrote Melio, an invoice payment platform.
Understanding your vendor’s priorities can also help you manage your internal operations accordingly. For instance, if your vendor struggles with cash flow, set up an expedited internal approval workflow to ensure your invoices are always paid on time. Look for opportunities to align in ways that are more cost-effective for both partners.
[Read more: Negotiating a Vendor Contract? Here's What You Need to Know]
Make communication a two-way street
“When it comes to suppliers, buyers too often believe that because they’re the customer, they can dictate to your suppliers. But most of the time—and especially with key suppliers—that’s rarely the case,” wrote Fairmarkit.
Strong relationships are built on trust and accountability. Mistakes happen: Payments are sometimes delayed, invoices can have typos, or emails get lost in busy inboxes. If something goes wrong, accept responsibility for anything that may impact the vendor’s ability to deliver as promised. This approach will go a long way toward building a successful, long-term arrangement.
Monitor for risks
Be proactive about monitoring and tracking potential risks to your business. Natural disasters, diplomatic stand-offs, and global pandemics impact every business. Working together to mitigate these risks will help your business and your vendor navigate disruptions in the best way possible.
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