A Business Owner’s Guide to Vendor Management
What is Vendor Management?
Vendor management is a term used to describe the procedures of analyzing and overseeing the entire relationship that a business has with a vendor. This includes the initial choosing of a vendor, making sure they’re making the correct deliveries in time, as well as a number of other qualities that the business should keep an eye on. To get a better idea of what businesses mean when they say vendor management, continue reading to get filled in on everything you need to know regarding vendor management to ensure you pick the perfect vendor for your business as well as understanding how to facilitate the relationship so you get the most out of it and are supporting your business to the fullest.
Vendors and your business
Unless you have a farm attached to your restaurant that’s able to supply you with everything you need, you’ll need a vendor that will work to supply you with the equipment needed to run your store. Now, the supplies you’ll need and the type of vendors you’ll want to partner with are completely dependent on the type of business you’re running.
For example, if you’re running an Italian restaurant, you’ll want to research vendors that can supply the foods you’re interested in serving as well as any drinks you plan on serving. On the other hand, if you’re running a carpentry business, you’ll need a vendor that will be able to supply wood as well as any other equipment you may need.
What does a vendor do exactly?
A vendor is a business that typically sells its products wholesale to other businesses. These products can range anywhere from food to office supplies to large machinery. Most businesses don’t have the means to produce and ship their own equipment on a large scale, which is why they turn to vendors. They give them an avenue of receiving any and everything they’ll ever need to ensure the success and continuation of their business.
Why is vendor management so important?
Depending on the industry you’re in, you may have many vendors to choose from. In fact, there may be so many that you’re unsure of who to go with. This is where proper vendor management skills come in handy, not only should you be looking for the best deal in terms of price, but you should also be looking for the best deal in terms of quality of product. If you make the mistake of choosing a vendor based solely on whoever’s the cheapest, then you risk putting out a subpar product and alienating your customer base. On the other hand, if you’re only concerned with getting the highest quality product and throw caution to the wind in terms of pricing, you may find yourself losing money instead of earning a profit. This is why vendor management skills are so important for the success of your business, you have to understand how to pick and choose your vendors based on properly analyzing your business needs. Not only that, but you should understand how to properly analyze the relationship with your vendor so you’re constantly aware of where you need to improve and how.
Continue reading as we explain each aspect of the vendor management relationship that you should be aware of so you can be sure you’re building a successful partnership with whichever vendor you end up working with. Also, no matter how good you are at managing the vendors for your business, it means nothing if your managers are using an outdated system of procedures for making employee schedules that ends up taking up all of their time and makes it hard for your employees to receive their schedules. To help you out with this, take a look at some of the features offered with Deputy, as well as clicking on the button below to begin your free trial.
How to pick a vendor
With you now having a better understanding of what vendors are along with what goes into proper vendor management, let’s get into how to choose a good vendor in the first place so you don’t end up with any major issues down the line. Here are the tips you should be the most aware of.
- Define what you need from a vendor
Setting the criteria for what you expect from a vendor is important in the initial steps so you know what to look for. Take a look at some of the criteria below so you know what to model yours after or at least have an idea of how you should set it up.
Quality of supplies, whether it be hardware, food, or anything else. Before you move forward with a vendor, you must be assured they’re able to provide exactly what you need to build a profitable business.
How long it will take for them to send an order out and how long will it take for your business to receive it? This one is especially important, if you’re running a restaurant and your vendor informs you that the delivery you were expecting to receive by Friday isn’t coming in until Monday, then you may risk running out of crucial supplies over the weekend that can seriously damage your brand. To ensure you don’t find yourself in this type of situation, then make sure you’re asking plenty of questions and are conducting research regarding how long it will take the vendor to fulfill orders. If not, you’ll just end up hurting yourself in the long run.
What limits do they have in regards to how big orders can be along with how small they can be? There’s going to be times where business is slower than usual and times where business is picking up and is busier than usual. Either way, you’re going to want to be assured your vendor is able to adhere to your orders no matter how big or how small they may be.
What are their storage and handling procedures? If you’re running a steakhouse known for serving some of the best steaks in the country, then you want to be assured your vendor has strict policies in place to assure their steaks are treated with the highest of quality before it reaches your restaurant. Not only that, but you’ll want to be assured that they have procedures set in place to guarantee your steaks will be taken care of while they’re being shipped to your restaurant, this means trucks with air conditioning units in the back to assure that they don’t spoil during the trip over there.
Do they have a return policy? What does it entail? You’ll want to be assured your vendor has a thorough return policy so you have somewhere to turn in case anything were to go wrong. Also, if you end up needing fewer supplies then what you’ve received, you can always return the extras so you can save some cash.
Lastly, you’ll want to make sure your vendor can supply you with a contactable reference that’s able to be reached during business hours as well as an email address. You need to be sure you can contact your vendor with any and all requests or questions you may have regarding your shipment. You never know when things can go wrong, so be sure you have this information on hand.
- Figure out how you’ll find suppliers
There are many avenues you can use to find suitable vendors for your business needs. Your choices are to:
Publish what your needs are in a trade publication so you can call for bids.
Approach companies directly so you can get proposals and estimates first hand.
Whichever choice you end up going with is completely up to you and what you prefer. If you like, you can always do both to see which one ends up giving you the best deal.
- Request for Proposal (RFP) or Request for Quotation (RFQ)
If you do end up putting out a call for bids, then you can request the bids in one of two ways. The first is a Request for Proposal (RFP) which is when a company asks for proposals from vendors and the second is a Request for Quotation (RFP) which is where a company invites suppliers to bid on proposals.
- Compare your choices
Now that you have a list of bids that you can choose from for your business, it’s important you compare how they stand compared to your list of criteria that you put together earlier. This way, you can be assured your vendor is capable of meeting all the expectations that you have from a vendor. If certain vendors only meet some of your requirements but not all of them, then figure out which are most important for the success of your business.
After you’ve chosen your vendor
Now that you understand how to go about picking a vendor that is perfectly suitable for your business needs, it’s time you learn how to analyze your vendor relationship so you can be sure you made the right decision with whichever vendor you ended up going with.
To ensure you’re doing this correctly, ensure that you do the following:
- Set performance indicators for your vendor
In order to evaluate your suppliers, you first have to set up performance indicators so you have guidelines in place for knowing what you should be checking for. An example of this is:
How often were they late on deliveries?
How often have they forgotten items on their shipments?
Have the drivers been respectful and helpful during their deliveries?
How responsive were the contact references you were given? (Make sure you test the numbers and emails given to you so you know they’re effective.)
In the beginning, it’s very important that you do your best to evaluate your vendor so you can rest easy knowing you made the right decision.
- Educate your team on how to handle vendor relationships
No matter how hands-on you are with your business, there will come a time where your store receives a shipment while you are away, and you’ll need to be assured they can handle it properly in your absence. This means coaching them on what should be coming with each shipment, the questions they should be asking the delivery person, along with where to store the delivery when it reaches them. To make it easier on them, go ahead and print out a document for them to quickly reference whenever they need to so the process is much less complicated on their part.
- Maintain a positive working relationship
Like any other working relationship, you have to put in the effort to maintain a positive working relationship with your vendor. Remember they’re the ones that are shipping you the supplies you need to keep your business afloat. To make it easier on your vendors, try to include very specific directions regarding how you would like your supplies packaged and placed in your store so your vendors don’t have to deal with any headaches down the line.
- Don’t be afraid to fire them
Lastly, don’t be afraid or hesitant to fire your vendor if you feel like they aren’t performing up to the standards you expect them to. Remember that this is your business and you’re the one that’s responsible for its success, and part of that responsibility includes cutting any ties you feel like is holding your business back. Just make sure you have another vendor lined up before you let them go.
Closing thoughts
Vendors are one of the most important aspects of your business that don’t get brought up all that often. Regardless, you should be sure to do your research and take your time to assure you’re going with the best choice as well as perfecting your company’s operations for handling vendor management.
Along with that, you should also research some of the features that come with using Deputy, an employee scheduling platform built to free up your managers’ time so they can focus on strengthening your business. To see it in action for yourself, click on the button below to start your free trial.
