Running a business

10 tips to effectively manage vendors and suppliers

Some of the most important relationships you’ll develop in the course of running your business are your relationships with third party vendors and suppliers. As a business person, you will need to rely on other experts for their knowledge of materials, care and maintenance of equipment, and more. You can’t be expected to know everything or source everything you need for your business, which is why these relationships are essential to long-term business success.

Below are 10 tips for managing suppliers that apply whether or not your current working relationship is smooth sailing, or has happened to hit the rocks.

1. Choose wisely

If you have the luxury of choosing between multiple suppliers, take the time to examine each one’s pros and cons. Determine which one can give you what you need, when you need it, and for the right price . Evaluate everything from their response time, to their contract terms, to their costs. Relationships are most successful if they have the time to grow, so you want to select a supplier that you and your organization will be able to grow with.

2. Communicate

The easiest way to engender ill will in any relationship is a lack of communication. Take the time to communicate with your suppliers and ask for the same type of outreach in return. This is especially important regarding timelines.

If a project timeline changes, your supplier should be one of the first people to know. An earlier alert keeps them in the loop and could make a mutually agreed upon solution possible. Your supplier should be able to problem-solve and troubleshoot issues pertaining to material quality and delivery, so use these traits to your advantage when you’re facing difficulties.

Also, remember to not use communication as a way to test your suppliers. If you need them to meet a specific date, explicitly tell them. Don’t ask them to guess or read your mind and then be surprised when they can’t.

3. Understand their business

While you don’t need to necessarily understand every nuance about a supplier’s business model or operating procedures, having a general working knowledge of their policies will help you to better understand their values. It will also give you context to the challenges they face, which is especially important if you work in a business with shifting priorities and deadlines that requires a great amount of flexibility. If you understand why a supplier might say “no,” it makes it much easier to plan ahead.

4. Plan for contingencies

There are normal everyday contingencies you should build a supply continuity plan for, like late shipments or weather-ruined pallets. There are also major disruptions to plan for, like natural disasters or critical equipment failure. Most of these contingencies will probably be developed in-house, but you should make a concession for your suppliers and make sure they have a clear understanding of how you will expect them to behave should the unthinkable happen.

5. Put as much thought into rewards as penalties

Penalties are there for those times when someone does not hold up his or her end of the deal. With that in mind, there should also be a reward for when work is above and beyond expectations. Thinking about worst case scenarios is important, but also assume that suppliers will exceed your expectations, and that they should be rewarded when they do. A reward could be an especially prompt payment or a simple “Thank You” note.

6. Accept accountability

Both the client and the supplier are responsible for the success or failure of the working relationship. Accept accountability for your place in the process by acknowledging that your decisions, delayed timing or changes in project scope directly impact the supplier’s ability to do his or her job well.

7. Invest in supplier management software

This is really to preserve your sanity or the sanity of your office manager. Supplier relationship management (SRM) software is especially important as the number of suppliers you work with grows. It can be used to monitor supplier performance and keep all of your supplier details in one place. Many SRM programs also interface with accounting software, making for a seamless invoicing experience.

8. Pay on time

Your supplier does a job and should be compensated for it. Consider the last time a customer was late paying you. Even if they had told you the check would be a few days late, consider the slight annoyance you felt at having to wait, and the relief you felt when the check finally arrived. Paying your vendors on time and abiding by their payment terms demonstrates that you respect them and the work they do.

9. Stay flexible

This is different than planning for disasters or setbacks in your production schedule. Staying flexible means adapting to everyday issues that arise.

10. Continuously work on strengthening your relationship

Look for opportunities outside of general day-to-day contact. If you have a quarterly meeting or invite your suppliers to come and visit your facility, make sure to spend time with them and forge stronger bonds. Ask your suppliers for feedback. Encourage them to have open discussions with you about ways that the relationship could work better or more efficiently. Supplier relationships are partnerships–they are a two-way street.

Forming long-lasting and mutually beneficial relationships with suppliers will aid you in keeping your manufacturing schedule on time and ensure that you make and sell quality products. These reasons are important enough to make sure that you manage your supplier relationships well.


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