How To Build Strong Vendor and Supplier Relationships

by Jarie Bolander on May 31, 2010

Vendors and supplies provide a critical service for any business. This service allows your business to focus on building products or services that add value to your customers. Vendor and supplier relationships are a delicate dance between your businesses best interests and the sometimes competing interests of your suppliers. One thing is clear: all parties need to receive mutual benefit form the releationship. This is an important dynamic to understand since, in the long run, a healthy vendor and supplier relationship will be a competitive advantage.

Developing Relationships

Relationships matter. So much so that it’s vital to develop good vendor and supplier relationships continuously. The foundation for these relationships includes the following:

  1. Respect: Relationships are built on mutual respect. If you don’t respect a vendor or supplier than the relationship will be doomed to fail.

  2. Trust: Building trust provides the cornerstone of your vendor or supplier relationship. Trust is a two way street that must be cultivated at all times. Trust becomes important when times get tough.

  3. Mutual Benefit: Relationships need to provide benefits to both parties. Without mutual benefits the partnership will be on shaky ground since the incentives to stick around are lacking.

  4. Fairness and Honesty: Fair and honest partners will always win out in the long run. Any short term gain realized by lying, cheating or taking advantage of a partner will tarnish the long term relationship and destroy trust.

Without these components, a vendor or supplier relationship will be challenging to maintain and will certainly descend into a bad situation over time. Remember all of these components must be present because they feed off each other and allow the relationship to be productive instead of a chore.

Getting The Right Deal

There are many facets of a vendor or supplier relationship to consider when negotiating terms. These facets revolve around the following:

  • What’s in it for me? This seems obvious but many a business person has launched into a deal where they did not understand the true benefits a particular vendor or supplier gave them. They basically just followed the crowd and did what everyone else did.

  • What’s in it for them? A mutually beneficial relationship requires both parties to understand what each one brings to the partnership. Having a keen insight into why a particular vendor or supplier wants your businesses will make the deal easier to do.

  • What really matters to my business: Sometimes price will matter while other times maybe turn around time is your hot button issue. Whatever the issue, understand how each vendor and supplier contributes to your business and how that plays into your core business needs.

  • Can they deliver? Vendors and suppliers can promise a lot but never deliver. This is especially true for small vendors that are ramping up their capabilities. Be aware of the particular challenges that your company may apply to a supplier so that you can judge their ability to deliver.

The list above is my no means exhaustive but gives a good starting point for figuring out the type of deal your company needs. One thing to avoid is to make the process all about price. The price you will pay is always important but there are so many other considerations that may matter more. Assess your real needs and then go after the deal that makes the most sense.

Conflict Avoidance and Resolution

All relationships have conflict no matter how good they are. Always try to avoid conflict but recognize when conflict is present. A good vendor or supplier relationship will be able to withstand some amount of conflict as long as both parties want to resolve the conflict in a productive way. Too often, a vendor or supplier relationship will turn south when one of the parties decides to take advantage of the other. Taking unfair advantage of a situation is a short sided approach to building a lasting business. Again, it’s fine to negotiate hard get the best deal but it’s also wise to understand the implications.

Resolving conflict is never easy. In fact, most of us shy away from dealing with conflict until it hits the point where the conflict becomes unavoidable. Some of the most common vendor or supplier conflicts include:

  • Late payments: Everyone makes late payments so don’t avoid a late payment issue by just ignoring those accounts receivable calls. Confront any ability to pay problems as early as you can and talk with your vendor or supplier about it. Nine out of ten times, they will understand and try and figure out a way to work with you.

  • Product returns: Products can sometime come to you damaged or defective. When this happens, you vendor or supplier should be notified right away so corrective measures can be taken. Handle any product returns with care and respect since a good vendor will want to correct the issue as soon as they can.

  • Specification misunderstandings: Subcontracting can be a tremendous asset to a company if the work to be performed is properly specified. When specification misunderstandings creep in, strive to not lay blame but rather get to the root of the matter as a team.

  • Late Delivery: Chronic delivery problems are a telling sign that your vendor or supplier is struggling to meet your demands. This problem can be sorted out in a variety of ways depending on the root of the problem. Discuss the late delivery issues with your supplier by looking past the late delivery and figure out why the deliveries are late.

  • Poor product performance: Product performance can be affected by many things. Most vendors and suppliers are constantly looking for ways to reduce their costs while still maintaining a high level of quality and performance. Sometimes, they miss an important parameter that they feel is a nice to have but for your product, is critical to have. This is why proper performance specifications should be agreed upon up front. That way, any process change can be compared to what your requirements are.

Conflict resolution can be tough but avoiding the conflict will be even tougher. It’s always best to avoid conflict if possible but if that’s just not going to happen, then be as proactive as you can to resolve it.

Strive to Build Lasting Partnerships

Building a strong partnership should be your goal when selecting vendors and suppliers. These partnerships will only strengthen your business and allow you to focus on your core competencies. Good vendors and suppliers also want to build strong partnerships because that builds a strong business for them. The selection, cultivation and building of your vendor and supplier relationships should be a continuous process that strives to balance your business needs with the needs for your partners. When those needs align, your partnership will be successful. When they don’t, you will need to either work hard at aligning them or choose a new partner.

Want a winning strategy to create strong partnerships with key partners? Then checkout Ilya Lichtenstein’s Play available here

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