For most companies, relationships with external vendors are integral to the successful running of the business. Vendors supply essential software, production elements, and oversee overhead and utilities. To streamline vendor management, cut costs, reduce risks, and boost profitability, there are five essential best practices to consider. Incorporating them into an efficient process is sure to help make managing vendors easier.
Clearly Communicate Your Requirements
At the start of the strategic sourcing conversations, it is vital to clearly communicate your requirements, expectations, and desired outcomes to external vendors. This practice is essential for successful collaboration.
It is essential that your vendor contract delineates the duties of both parties. From your side, these expectations will most likely be connected to payment schedules. Establishing specific terms in writing makes sure that all stakeholders comprehend the conditions of the agreement. Furthermore, this serves as a blueprint in case of any dispute that may arise.
Hold Vendor Performance Review Meetings
Vendor management plans often go astray when Procurement teams neglect to demand compliance from their suppliers. A proper framework includes performance management dashboards, which enable Procurement teams to continuously assess their suppliers’ performance.
To maintain effective communication between vendors and their clients, it is best to schedule a meeting to review vendor performance on a quarterly basis. This is a great opportunity to review expectations and discuss any potential strategic business changes that may influence the relationship.
Prioritize Value
To get the best return on investment, sourcing and procurement should not be focused only on keeping costs low; there are other ways to maximize value. Paying slightly more for a CRM platform that does not restrict usage or penalize for exceeding limits can improve your business position.
PRO-TIP: Incurring the cost of hiring a customer service representative could be beneficial for ensuring the expeditious resolution of customer issues and a smooth functioning of the business operations.
Consider Managing Contract Renewals Manually
For many agreements made with outside providers, they will be valid for a fixed amount of time with an expected renewal at the end of the period. Usually, Software as a Service (SaaS) contracts will renew automatically, and they may include a clause where the pricing reverts to the regular pricing model unless you previously renegotiated. To control costs and spending, it is recommended that contract renewals be handled manually instead of automatically.
Run Supplier Risk Analyses
An efficient strategy for minimizing potential hazards when engaging vendors is to perform a supplier risk analysis at the beginning of and throughout the course of the collaboration. This involves pinpointing any dangers and using a risk matrix to evaluate the severity and likelihood of them occurring.
PRO-TIP: Leveraging a vendor management system can significantly simplify the intricate process of working with vendors. This specialized software offers a variety of indispensable functions for maintaining a healthy relationship with them.
At SCS, we can help! Our priority is guaranteeing you receive the most ideal pricing, terms, and conditions. We can offer a conflict-free, comprehensive market overview and negotiating points for vendor pricing, discounts, and contract terms that your team can use to reduce costs and perfect contract terms. Contact us today for a free consultation!