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Nov 30, 2015
There are a myriad of ways that a business can lose money. From scope creep to exchange rates, some things are out of our control. But dealing with suppliers doesn’t have to be one of those things. In fact, having an effective vendor management strategy can help your business save big on time, money and reputation.
Christine Galer, President of Total Procurement Solutions, works with businesses to control costs and manage risks. We spoke with Galer about her top tips for getting the most out of your vendor relationships.
“You’re trying to use your time as best you can, and you’re wanting to be as effective as possible,” explains Galer. “So you’re going to have your top 10 suppliers of your critical items or critical services that you need, and you’re going to want to have those identified right away.”
Identifying key suppliers allows procurement specialists to focus their efforts when setting up reporting systems and ensuring that the end users of the product or service they are purchasing know what to communicate with them and how.
After identifying key suppliers, Galer explains that the next step is to take it down a level and determine what the most important things are that your company gets from those suppliers. “The most important thing people are looking for is a result,” she stresses. “It’s not necessarily a product or a service.”
With this principle in mind, Galer suggests mapping out key performance indicators. She explains: “You’re going to want to define what those key performance indicators are, whether it’s quality, service, effectiveness.” These indicators might include knowing the damage claim rating of a shipping supplier, a manufacturer’s safety rating, or how a supplier is controlling their cost. “A purchasing professional will know in advance and expect a call from a supplier that a price is going to go up,” Galer emphasizes.
Once these key performance indicators have been prioritized, the top five or 10 can be used to measure the effectiveness of a given vendor relationship.
Vendors need to be aware of your company’s needs and priorities, in order to have the best chance of meeting those needs. “Nobody sets out to do a bad job, on purpose,” says Galer. “You want to be able to guide them in the path that will be the most useful for you. Especially if they’ve never dealt with you before.”
On top of that, Galer stresses the importance of record keeping, in whatever vendor management system your business uses. “The biggest thing is that you have a record -that you have everything in writing that you can feed back to the supplier.”
Galer recommends providing this feedback in a “friendly, non-confrontational way, and not when you’re in an emergency situation, so that you ultimately don’t have an emergency situation.”
Ultimately, for Galer, what it all boils down to is good relationships with vendors; vendors who will come to you first if a price is going to go up, or if a product you use heavily is no longer going to be available. “For planning, [suppliers] can be your best friend,” she says. “That’s the biggest safety and risk mitigation strategy you can ever have, is having really solid relationships with your suppliers.”
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