How to Get the Most Value from Your Vendors
Follow these four strategies to help strengthen relationships with key partners.
Businesses that actively manage their vendor relationships can gain distinct advantages over competitors. Vendors that know your priorities and understand how they can support your company can be a powerful asset to your business. Use the following tips to help derive the most value from your vendors:
1. Share your company's priorities
The more information you provide about your operations, the better the results can be. If vendors supply key products or services to your business, invite them to meetings that involve their contributions so you can benefit from their expertise. Ask questions about their work to better understand their business and work toward building a stronger partnership.
2. Understand fair market price
A strong vendor relationship involves more than just getting the lowest price; it's about forging long-term relationships that can yield better service and high-quality work:
- Understand the current market rate and request multiple bids (at least three).
- Know your budget limitations and be willing to pay more for quality. Pressuring vendors to lower their fees below market level may affect the quality, while strong-arm negotiations may lead one of the parties to eventually walk away.
3. Be candid about performance
If a vendor's terms or work don't meet your expectations, tell them. Constructive feedback can enhance the quality of future work. Alternatively, recognizing good work can build loyalty and help serve as an investment in future projects.
4. Disclose terms in writing
A missed deadline can hurt your company's reputation and your bottom line. For bigger projects, you may want to set standards to measure your vendors' performance:
- Negotiate a fair and equitable penalty when measures aren't met (deadlines, delivery dates, quality of products or services).
- State the details of compensation and the dates when the contract takes effect, terminates and renews.
- Address potential liabilities and risks related to the relationship or services provided.
- Beware of restrictive and exclusive terms or severe penalties in case you need to break the contract.
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