The 5 Top Vendor Management Best Practices
You’ve heard all the statistics about how many small businesses fail. That’s why, when it comes to the success of your small business, cost savings is often the name of the game. One of the most critical pieces of the penny-pinching puzzle is solid vendor management.
Are your vendors meeting the needs of your business? Are you able to negotiate the best rates possible with them? Do they have processes and procedures that work for you and your store? To manage your vendor-related operations effectively, you will need to be able to answer all of these questions and more.
Let’s go over some of our best practices for a killer vendor management strategy. Once you incorporate the five tips below, you can take your vendor management processes to the next level.
Vendor Management Best Practices
Before we get into the details of best practices, let’s get on the same page about vendor management. In short, vendor management is the process your business uses to handle your suppliers. This includes everything from vendor selection to service delivery and everything in between.
Vendors are the lifeblood of any product-based business. After all, without vendors and suppliers, the shelves of your store would be empty, and customers would have nothing to buy. This is why having an effective system for vendor management is essential to the success of your business.
POS Nation has been supporting small retail business owners for over 20 years. In that time, we’ve learned the dos and don’ts of vendor management. To see how our software solutions can set you up for vendor management success, get a demo today! Read on to see our top five tips for excellent vendor management.
1. Get Organized Internally
The first step you need to take to guarantee smooth sailing with your vendors is to set up your internal processes and communicate them to all staff. Set clear expectations for who is responsible for communicating and interacting with your vendors. Additionally, you should have a formal policy regarding your vendor communication processes. This ensures that, regardless of who your vendors speak with at your business, they will have a consistent experience and receive consistent information.
You should also set up a process for new vendor selection. What is your ideal number of vendors? What types of vendors do you need to partner with? When is it appropriate to search for a new vendor? You should have a process for auditing new possible vendors to ensure that they will meet the needs of your store.
Lastly, make sure you have a plan for offboarding any vendors you choose to end your relationship with. Your vendors may have access to confidential information pertaining to your business or vice versa. Outline the steps the vendor should take with that data upon the end of the relationship in your contract. The contract should also outline processes for final payments and any other loose ends that will need to be tied.
2. Get Organized Externally
Once you have your ducks in a row internally, your next step will be to set things up with your vendors. The best way to have a positive business relationship with your vendors is to set clear expectations from the get-go.
First and foremost, set up clear payment processes and procedures. This should be in a formal, written contract and should include costs of services and products, pay schedules, and any penalties incurred due to late payments.
We also recommend establishing clear communication expectations with your vendors. Keep communication lines open, and ensure your vendors feel comfortable addressing any issues or challenges that might affect your business. This will help avoid misunderstandings between you and your vendors and help you solve any problems as they arise.
3. Consider Insurance and Liability
When it comes to running a small business, we all know that limiting liability is a vital part of your efforts to keep the lights on. This is why you should ensure that every vendor you do business with has the appropriate insurance policies in place. They should have workers’ compensation insurance and liability or third-party insurance.
Additionally, check with your vendors to see if they are subcontracting out any of their duties. If they plan to have any fourth-party agreements, ensure that you are aware of all such agreements and that those agreements are compliant. This helps limit your own risk concerning the practices of your vendors.
4. Keep Track of the Data
When it comes to tracking the success of your business, data is king. This is why another essential best practice for your vendor management processes includes setting up KPIs and other metrics you want to track. This will help you to keep tabs on how your vendors are performing and allow you to make good decisions in the future regarding your vendor relationships.
Once you have determined your key metrics and set up systems to track them, you will need to check those numbers regularly. This will help you identify any challenges early on to take any necessary steps to correct the issue.
To track your numbers effectively, you will need to make sure you are utilizing software that can help you with those efforts. Investing in a retail point of sale solution like CAP Retail by POS Nation can put powerful reporting and data analysis tools at your fingertips.
5. Foster Strong Vendor Relationships
Your vendor management processes are about more than just contracts and payments. At its core, vendor management is all about relationships. Setting up a strong relationship with your vendors can pave the way for smooth sailing in your vendor management processes.
Treat your vendors as partners rather than suppliers. Instead of simply negotiating prices, we recommend communicating with them regarding your business’ large-scale goals, showing them how their services contribute to those efforts.
This takes the relationship from transactional to collaborative, making it easier to forge stronger relationships.
The Key to Successful Vendor Management
For your small business to succeed, you will need an effective vendor management strategy. By following the best practices listed here, you should have all the building blocks you need to construct an unshakable vendor management process.
If you’re interested in learning more about how POS Nation can get you set up with point of sale hardware and software that can make your vendor management process a breeze, schedule a demo today!