Your business depends on other businesses. Every business does. In order to stay profitable, you need access to the lower prices that wholesale vendors provide. Things cost more than ever, so the less you have to pay for the products and services that your business requires, the larger your profit margins will be; and, the more lucrative your entire endeavor will be.
Your vendors, and the relationships you forge with them, are critical to your business’ success. As we stated above, the more attractive your supplier’s offers are, the higher your organization’s profitability will be. For this reason, many professionals tend to pander to their vendors and end up losing in some ways. For this month’s blog, we talk about forging a successful vendor relationship and how outsourcing your vendor management can work to clear your focus.
Who Are Your Vendors?
Vendors are the companies you purchase goods and services from in order to properly run your business. The vendors’ representatives are in a unique position in the market. They are typically salesmen who offer products their company manufactures or distributes--many of which are products you offer to your customers--so cultivating “special” relationships is advantageous. Most vendors will want to create personal relationships, many of which take you away from your work or personal time. Since many of these relationships, and their success or failure, depend on your willingness to commit to a baseline of business, understanding their position will allow your relationships to work for your business, rather than as a detriment to it.
How Many Vendors Do You Have?
This question really has a business-specific answer. The larger your business is, the more vendor relationships you should expect to have. There are vendors that do everything that your business needs, and there are some that do one specific, yet crucial thing. From utilities, to disposal, to the products needed to do business, some businesses have dozens of vendors they rely on. For managed service providers like us at SouthBridge Consulting, we typically have deal with a multitude of vendors as to be able to find solutions that work for our client’s specific problems (more on this later).
What Makes For a Successful Vendor Relationship?
The first thing you have to understand when dealing with vendors is that, while you are conducting business, treating your vendors simply as commodities is no way to develop a rapport with a vendor rep. A good relationship is a good relationship, and if you don’t treat your vendor rep with respect, you are probably doing the relationship, and your business, a major disservice. That’s why respect is a major factor. You have to respect their efforts, their time, and their positions; most vendor reps will do what they can to ensure you keep business with them.
We approach our relationships with our vendors as true partnerships, not commodities. As in your personal relationships the more equality a relationship has, the better the relationship is. Just like you, your vendor rep has his/her own financial goals, workloads, and clients. Their job isn’t any less or more stressful as yours. A Harvard study found that 85% of professional success comes from cultivating people skills. If that figure is to be believed, treating your vendor reps as if they are simply pushers of commodities will be a detriment to your endeavor.
Another key is communication. You have people depending on you, as does the vendor rep. You need to be able to ask (or in some cases demand) what you need. It’s easy sometimes to hedge and hope someone will guess what it is that you need. The best way to get what you want out of any relationship, and especially a business relationship, is to make your needs clear. High levels of respect and communication will put you in a good position to have the vendor relationships that not only work for their company, but for yours as well.
Don’t Lose Sight
Since vendor reps don’t always have access to the thing you are looking for at the price that you want, there is a good chance that you may have to use multiple vendors for the same type of product. As nice as it is to cultivate a good relationship with your vendor rep, you have to know what you're looking for. It’s critical that you keep your eye on the prize. Map out the products and services you are looking for beforehand, and stick to your guns about pricing, shipping, and support. Your vendors will run promotions that seem attractive, but on further inspection they may increase your costs over time. Promotions like these are good opportunities to try and test new products, sure, but if they come with long-term agreements, you will likely have to pass the cost on to your clients (because you can’t rationally eat them), and therefore, need to seriously consider passing on that opportunity. You are the one that knows your business and your customer base, so any opportunity, attractive or not, that could potentially increase your organization’s risk (cost or otherwise), without the promise of significant reward, should be passed on.
Bids, Bids, Bids
If your business is in the position where it needs to make a large purchase, and you have developed a nice report with a vendor rep, you may find that in situations like this, you need to be extra diligent. If you don’t have relationships like that in place, you’ll want to create a criteria to use to select a vendor. By being prepared, you’ll be able to be more impartial. Remember, most vendor reps are salespeople, and many are very skilled at making you see the value in doing business with their company; or, at the very least, about the product or service they’re selling.
Typically, if everything is fair, 80% of choosing the right vendor is going to be about value in dollars and cents. Some other criteria (beyond cost) you will want to look at, include:
- Years in business
- Quality of fulfillment
- Quality of support
- Quality of catalogue
- Client and customer testimony
- Order flexibility
Once you’ve established what you are looking for in a vendor, you’ll want to start the process of creating bid documents. There are three major types of bid documents:
- RFQ (Request for Quote) - Typically reserved for commodity purchases, where cost is one of the sole factors of consideration.
- RFI (Request for Information) - Kicking off a bidding process, you’ll use this type of form to obtain information about products or services, for use in your own internal planning. It also kicks off the vetting process.
- RFP (Request for Proposal) - Once a vendor has been vetted, and deemed a good fit, the vendor will be given this document to provide a formal bid for business.
Once you’ve done your due diligence, and begin considering bids, this is when the vendor reps become extremely important. If two vendors are close, consider which company you could see yourself working with for a while. Which rep do you like most? Since this is a business relationship, going with the one that will make it easier to do business will help put your business in a position to succeed.
We Can Help
As we stated previously, at SouthBridge Consulting our technicians have a lot of experience dealing with vendors, as it is typically our job to find the right solution for our clients’ technology needs. From software to hardware, from cloud hosting to security, from communications to printing, we have relationships with all types of IT vendors. As a result, we are positioned like no one in our market to help you manage your technology vendors. We have the experience, expertise, and patience to get your organization the best products for your needs, at the prices you can work with. Give us a call today at (281) 816-6430 and let us tell you how we can get rid of your vendor headaches forever.