Love them or hate them, vendors are an integral part of doing business today. In the past, all you had to worry about was procurement. You would find the best deal you could, cut a check, and be done with it.

Vendor management has become crucial nowadays. Vendors are never more than one click away—for you as well as for your competitors. So where do you gain your edge?

Focusing on vendor management prevents your business from being just one more drop into vendors' ocean of clients.

Then, what is vendor management? Vendor management is the process of overseeing and coordinating all aspects of your vendor relationships. It includes everything from selection and onboarding to performance management and contract renewal, with the end goal being to ensure that your vendors are providing the best possible service at the best possible price.

Staying on top of all these moving parts can be difficult, but investing in vendor management software can help. It keeps track of all your vendor relationships in one place, so you can see where each one stands at a glance. It also includes features like performance tracking and contract management, giving you everything you need to make a well-informed decision about your vendors anytime you need to.

 

Here are 5  reasons why vendor management should be a top priority for you:

 

Save Your Business Money

 

Let's start with the most obvious benefit of vendor management: it's potential to save your business money. But how?

By taking a more strategic approach with vendor management, you can increase your negotiating power, driving down the cost of goods and services. You can also avoid duplication of effort and reduce waste. This helps control vendor spend and allows you to get more value out of every dollar.

Because vendor management demands setting clear expectations, defining roles and responsibilities, and ongoing communication, it also often leads to improved vendor performance.

They'll always know what's expected of them and will be more likely to meet (or exceed) your expectations if they believe you're paying attention. This can lead to better quality products and services, which can further drive down costs.

 

Learn More About Your Industry

 

It's tempting to think of your business as existing in a vacuum, but the truth is that you're part of a much larger ecosystem. Knowing more about your industry can help you understand the forces at work and make informed decisions about your business's place in the market.

Keeping tabs on everything happening in your industry is a tough proposition in itself. But gaining industry knowledge is baked into vendor management.

The knowledge you gain from vendor management gives you a front-row seat to what's happening in your industry, such as how much money is flowing into certain sectors, which companies are growing and in what ways, and where the industry as a whole might be headed—all useful information for making decisions about your business.

For instance, say you want to improve restaurant efficiency. You might find that a point-of-sale system vendor also offers a suite of other products that can help you achieve your goal. Or, you might uncover an industry trend toward mobile ordering and pay-at-the-table options that could inform your strategies.

In other words, vendor management is about more than just assessing risk and keeping costs down. It's also about giving you a better understanding of your industry so you can make smarter decisions for your business.

 

Protect Your Business From Vendor Risks

 

Any business is only as good as its vendors. After all, they provide the products and services that you sell to your customers.

But what happens if one of your vendors has a problem? It's easy to just throw your hands in the air and hope it doesn't happen to you, but that's not a good long-term strategy.

Vendor management softens the blow of any vendor issues by establishing a process to identify and mitigate risks before they can occur. Those risks might include things like unforeseen costs, issues, or even data breaches—all of which can damage your brand and reputation.

Let's go over some of the ways vendor management helps shield your business from risks:

  • By establishing clear expectations and defining roles upfront, you can help avoid misunderstandings and potential conflicts down the road.

  • By keeping track of vendor performance, you can identify potential issues early on and inform them before it's too late.

  • By conducting regular audits and reviews, you can make sure that your vendors are complying with all relevant laws and regulations.

Vendor risks are simply unavoidable. But proper vendor management will help minimize the damage and get your business back on track as quickly as possible.

 

Build Better, Stronger Vendor Relationships

 

All entrepreneurs dream of a vendor partner that they can trust, and who will help them to build a flourishing business. Unfortunately, not all business relationships work out this way. Most entrepreneurs have encountered vendors that are difficult, unresponsive or constantly trying to upsell them on products and services they don't need.

Just as your business wants to develop sales and customer success, your vendor should also be focused on growing and developing their relationship with you.

Vendor management helps you discern which vendors are contributing to your business goals and which ones are dragging you down. A well-run vendor management program will also give you the data you need to make smart decisions about which new vendors to bring on board and how to work most effectively with the vendors you have.

When it comes to vendor management, don't just think about the here and now. Remember that trust takes time. Use that time to identify which vendors are the best fit for your business. These are the types of vendor relationships you want to cultivate. With a little luck, you'll find the vendor partner of your dreams!

 

Faster, More Efficient Onboarding

 

A natural consequence of vendor management is the culling of bad apples. When a business understands its vendor base, it can take steps to weed out those that are dragging down performance.

This can take the form of more rigorous contract negotiations, or simply refusing to do business with vendors who don’t meet minimum standards. The result is a leaner, more efficient operation. Of course, that means new vendors must be constantly brought in to take the place of those that have been cut.

Onboarding new vendors is a consistent pain point for many businesses. But with a good vendor management system in place, onboarding can be made much simpler. By keeping records of the business’s interactions and requirements, a vendor manager can quickly assess whether a new supplier is likely to be a good fit.

This saves valuable time and resources that would otherwise be wasted on chasing dead ends.

 From late deliveries to quality issues to miscommunication, working with vendors can sometimes be a maddening experience. You'll have no trouble rounding up a couple of entrepreneurs who will be more than happy to share a horror story (or two, or three) about a time when things went south with a vendor.

But it's essential to remember that you, as the business owner, are ultimately responsible for ensuring that vendors meet your expectations in terms of quality, safety, and compliance. And the best way to do that is to have a solid vendor management plan in place.