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How
To Develop Effective Vendor Relationships
By Dennis Sommer (www.dennissommer.com)
Successful relationships between your company and a product
or service vendor will result in maximizing your return
on investment. Building a strong business relationship
with a vendor takes time, dedication and a willingness
to always look for a win/win proposition for both parties.
Vendor Management programs are great at organizing and
controlling your vendors but will not provide the maximum
benefits your company requires to be successful. The following
guidelines walk you through the first steps toward effective
vendor relationships.
Determine
Your Goals
Building a strong vendor relationship means more than
cutting product or service costs. It is about improving
value provided to the business, reducing the time to deliver
solutions, reducing staff effort, and much more. Define
the goals and objectives of your department/company and
only work with vendors who are aligned with your goals.
When the vendor goals are aligned with your goals, the
relationship will be more successful since you are both
working toward the same end results.
Review The Vendor's Goals
Just like your company, the vendor will also have business
goals and objectives. Believe it or not, profit is not
the only goal they have. Their goals may include, building
a center of excellence, entering new markets, gaining
market share within a product line, developing industry
verticals, etc. It is very important for your relationship
to understand the vendors goals and determine how your
organization fits into this strategy. The more your organization
is tied to the vendors goals, the more value both you
and the vendor will receive from the relationship.
Review Your Current Contracts
Understand what leverage points you have with the vendor.
Determine what actions are available to your organization
based vendor performance. Understand what actions are
available to the vendor based on conditions your organization
is obligated to perform. Review how the deal was structured,
including: service level goals, pricing model, payment
schedules, general terms and conditions, etc.
Define Clear Relationship
Guidelines
Calling a vendor to meet with your organization only when
there is a problem with a product or service is considered
a problem relationship from the beginning. In this situation,
both organizations lose from this relationship. Clearly
defining a regular vendor meeting structure with a defined
agenda and processes is the key for both organizations
to understand the goals, needs, wants, and actionable
items of the other. Scheduling daily, weekly, monthly,
quarterly, or yearly meetings that bring in different
levels of the organizations with help in the alignment
of goals and increase the value to both organizations.
Four levels of meetings should be scheduled: 1) Company
managers and user with vendor sales account team. 2) Company
executives with vendor executives. 3) Company senior managers
with vendor product development managers 4) Company managers
and users with vendor product and services support managers.
Define Clear Roles And Responsibilities
Both parties must clearly understand each others obligations,
who is responsible and the expected outcomes. Clearly
defining this up front is a key success factor. A responsibility
matrix should be development and included in any service
level agreements. The responsibility matrix should include:
role name, role description (including areas of responsibility),
and interaction with other roles. This matrix includes
the roles and responsibilities for both the your company
and the vendor. Names are usually not included in the
service level contract since individuals might change
over the life of the contract. A separate contact list
should be created including role, contact name, contact
phone number, contact email, contact address, etc.
Define Critical Service
Levels
Defining a few critical service levels based on business
performance is more effective than creating hundreds of
technical service levels that will be ignored. Your service
level agreement should include no more than 5 measurable
business critical service levels. An example of a good
business service level is "Process Payroll by 11am
on the 27th day each month". This measurement is
much better than "Payroll system will be available
98.5% of the time.
Define A Clear Communication Plan
One of the most important roles your organization must
perform is opening the communications lines with your
product and service vendors. Reporting when things go
wrong is not good communication. Your organization must
open up the communication lines to find ways to improve
your business using expertise that the vendor possess.
It is important for your organization to understand where
the vendor can offer additional benefits and for them
to communicate these possible solutions to your company.
Open communication lines will allow the vendor to meet
your company's many changing business requirements throughout
the contract. Poor communication will reduce your relationship
to, "It is not in the contract" instead of the
response "How can we help you."
About The Author
- Dennis Sommer
Dennis Sommer
is the founder and CEO of Executive Business Advisers,
a management consulting firm specializing in business
growth, sales and profit improvement. www.executivebusinessadvisers.com
Dennis helps companies increase sales revenue, reduce
sales and marketing costs, improve marketing ROI, and
drive new business growth by improving and optimizing
their sales, marketing, company strategy and financial
health.
Dennis is a highly sought after business keynote and seminar
speaker www.dennissommer.com
and author of several highly popular sales, marketing,
leadership and professional development international
articles and books www.advisersecrets.com
.
Contact Dennis at 800-627-6512.
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