What is a Vendor Relationship?
A vendor relationship forms when a company buys goods or services from another company. The purchasing company is called the “buyer” and the selling company is called the “vendor.” These set of vendors B2B relationships form the backbone of a business and are called a “vendor network.”
How Do You Cultivate Strong Vendor Relationships?
Managing your vendors is aptly called “vendor management.” Like any other relationship, you must invest time and energy to make sure that you and your vendors on the same page. What this comes down to is:
- Prompt communication: Whenever something changes in an order from a vendor, make sure to give them a heads up!
- Paying it forward: If you meet another potential client for a vendor, send the prospect over their way
- Strategic alignment: Make sure your vendor is aware of your company’s long-term goals that way they can predict how to serve you in the future
Customers matter the most, but companies should adopt customer management principles and translate them to managing vendors.
When you codify a system of how you manage vendors, that becomes known as vendor relationship management: the set of data, technology, and processes a business uses to develop relationships and create a cohesive ecosystem with vendors to achieve their business goals. The sooner a company can achieve a vendor relationship management solution, the better.
What Are the Benefits of Strong Vendor Relationships?
Developing a good relationship with a vendor who is engaged in your company has innumerable benefits. If we tried to compile a list, you would get bored reading all the way to the bottom! But we’ll summarize some of the most critical benefits of having strong vendor relationships here:
Timely Orders: Vendors will prioritize you in the queue for receiving shipments, solely because you have a good relationship.
- Reduced Costs: With sustained orders and on-time transfer of funds, your company can push for discounts with vendors
- Additional Business: Vendors may refer people in their network to your business if they are looking for similar services.
- Consistent Process: A long-term relationship can let you run the same process, minimizing operational overhead and learning frictions
- Preferred Products: Higher quality products may be sent your way, or at least you will be the first to know about issues in product quality
- Customer Fulfillment: At the end of the day, if the vendor likes your company and does its job, your customers will see a better product.
How Do I Start Building My Vendor Network?
Your vendor network will grow as you do business. You may not even be able to develop a relationship with some vendors (e.g., large, arms-length tech companies), and others, like your accountants or lawyers, you will have to. Make sure to find quality vendors and keep track of them.
A lot of the time you can go ahead and find vendors using Google and track them with a spreadsheet. if you are a little bit more advanced and or want to make your life easier you can start looking for software. For SaaS companies, Zluri is an example of software that can track expenses and vendor relationships. For more physical goods, Parq is a representative software, tracking your current vendors and helping you find new ones.
It’s exciting to build out your vendor network. Leverage it; use it to grow. If you think someone else would benefit from reading this article, please share.
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