By Paul Mason, Vice President Professional Services APAC, Rahi
Choosing Suitable Vendor is Important for Business Success
With today’s businesses proliferating at a rapid pace, it is in their best interest to outsource certain tasks to decrease the workload of their internal teams. This enables them to increase their productivity and accelerates their business growth. However, sourcing and vendor management have become increasingly complex as organizations step into emerging markets while leveraging third-party suppliers to deliver what cannot be produced internally.
The risk associated with it also takes a toll on the cybersecurity infrastructure of the enterprise. A recent report from KPMG revealed that nearly three in four respondents of the vendor management survey have experienced at least one significant disruption, caused by a third-party vendor within the last three years. Therefore, today’s organizations must follow a certain set of practices that not only streamline their collaboration with their vendors but also lay a foundation for strengthening their partnerships.
Here are a few best practices that organizations should follow to strengthen their relationship with their customers:
Review the vendor risks
This is one of the most important strategies to ensure vendor management meets expectations. Risk assessment of vendor management is a continuous process that often starts with organizations identifying a requirement from their vendor. However, even before assessing the risks, organizations should be aware of their vendor inventory. In fact, as per a 2022 report from Venminder, it is crucial to have a correct vendor inventory to determine the risk’s scope and size. Monitoring their internal and external environment and assessing the controls in place to mitigate vendor-associated risks can ensure a streamlined vendor performance that meets all the requirements.
Nurturing along with maintaining the partnership with vendors is one of the best practices for strategic vendor management. An effective procurement process can accelerate innovation via business development and R&D. Also, frequent vendor collaboration can provide multiple benefits for an enterprise. For example, a McKinsey & Company report revealed that organizations regularly collaborating with vendors often have reduced operational costs. Not only that, but their closer relationships also helped them to outperform their competitors.
Gather vendor feedback
One of the crucial steps toward fostering relationships with the vendors is to gather feedback from them on a regular basis. Organizations should ask what objectives the vendor is planning to achieve from their alliance and how they can support them to meet their expectations. Additionally, they should also clarify their long-term goals to have a mutual understanding of where the relationship is moving forward.
Invite key vendors to strategic discussions
If the vendor provides a key component or service to the enterprise, it is in the organization’s best interest to involve the product they work with. Their insights and expertise can help the enterprise to gain a competitive advantage in the marketplace and broaden the scope of the specific product or service.
Track vendor’s performance
Monitoring vendor performance ensures that the vendors continue to offer value and comply with the contracts and agreements. To implement this, organizations should have a list of KPIs at the time of signing the contract with their vendors. Both vendors and key stakeholders should be aware of these metrics so that everyone involved will know what is expected of the relationship. It also maintains vendor data to ensure that the organization is up-to-date on vendor performance and can react accordingly if the performance deteriorates.
Balance commitment and competition
One of vendor management’s primary goals is to manage their vendors’ commitment to assist and support the operations of their business. At the same time, the vendor also expects a certain level of commitment from their partners. This does not mean blindly trusting the vendors with the prices they offer, but rather to fulfill the commitments once agreed with the vendors.
Take the investment forward
In a few cases, it can be advantageous to financially invest in enhancing the capabilities or capacity of the vendor. This will strengthen the relationship between the two parties, thereby enabling them to achieve their respective goals.
Irrespective of the size of an organization, managing the vendor ecosystem is one of the biggest challenges faced by them. While choosing suitable vendors for the success of the business is critical, it is also important to continuously nurture the relationship with them. This not only will help organizations to achieve their short-term and long-term objectives, but also empower them to focus their efforts where they matter the most.