Managing Vendors 101

Selecting your vendors for the right reason is very important

. Although the process is tedious and cumbersome, it is important to select vendors who meet the business requirements set forth by the internal customer. A Vendor Management Office's job is to select the right vendor and negotiate the best possible deal. So what are some best practices for managing vendors?

Well, the vendor's job is to dazzle you with their marketing and to make you believe that they are the ones who should get your business. The larger the project, the more their focus on impressing you to win your business. Therefore it is important to make sure that all discusions and decisions to select the vendor are based on their capability, their past performance, their experience and the best price that you can get.

Negotiate a contract that is thorough but flexible so as to allow minor adjustments when changing business needs demands it.

Be wary of restrictive or exclusive relationships. For example, limitations with other vendors or with future customers. In addition, contracts that have severe penalties for seemingly small incidents should be avoided. If the vendor asks for an extremely long term contract, you should ask for a shorter term with a renewal option. Keep in mind that mutually beneficial contracts make vendors into partners.

Vendor performance management should be a key metric for your organization. Everything that can and will go wrong, will. But the contract should include service level agreements and key performance metrics to track important business metrics like timely shipments, response times, etc. etc.

Finally, communication is the key to eliminating misunderstandings and addresssing issues before they become problems. Therefore keep an open communication channel between your team and the vendors. Make yourself accessible to vendors and ensure that they have the support they need to fulfil the contract to meet your needs.

Managing Vendors 101

By: Pallavi Barnwal

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