How to Maintain a Positive Supplier Relationship

via George Mason University

via George Mason University

Welcome back retail enthusiasts! Last week we talked about how to find your perfect vendor partner – a supplier you can rely on for a successful, long-term partnership. But what if you’ve already found your vendors, how can you know that they are the best fit for your business? That’s what we’re talking about today – evaluating and maintaining your supplier relationship. We’ll discuss key ways to assess vendors based on important performance indicators as well as tips to maintain a positive relationship – if you have it – and when to call it quits – if you don’t.

After finding a vending partner, there are several ways to maintain and evaluate the relationship. Open, honest communication is incredibly important for expectations to be consistently met. Neither you nor your vendor should try to one-up the other, but instead focus on how to both benefit from the relationship.

#1: Articulate expectations and goals

Both parties in a vendor partnership should have specific goals that your partner can help you meet. The more detailed you are about your expectations for your business and your supplier, the more likely you are to be satisfied by the partnership. Begin by conveying your expectations on important routine activities like handling late payments and/or deliveries, how often you expect communication to occur, and strategies for handling emergency situations.

Again, remember that this is a partnership. This means that your supplier will, and should, have expectations of you as well. For a great business relationship to develop, you need to be willing to compromise and put in your time and effort.

#2: Establish methods for communication

According to Ray Carter, director of DPSS Consultants and author of the “Seven C’s of Supplier Evaluation,” establishing how routine and emergency communication will occur is critical to maintaining a positive relationship. Begin by articulating your expectations for communication as clearly as possible. This should include:

  • Who will be your primary contact (both in your business and in theirs)
  • How often do you expect to check-in with each other
  • What form of communication will you primarily use (phone, in-person, email, Skype, etc)
  • How do you plan to handle communication in the event of a crisis

#3: Establish performance indicators

Using the expectations you both have agreed upon, develop driving metrics to evaluate your vendor on a consistent basis. Drew Greenblatt, president of Marlin Steel Wire Products, suggests doing these evaluations monthly, quarterly, and/or annually. While your business will have unique needs and challenges, Greenblatt says his performance indicators contain:

  • Percentages of on-time performance
  • Number of quality product shipments received
  • How quickly the vendor responds to requests for quotes

These three indicators are important for every business, but how you measure a vendor’s performance will vary. There are several factors you should consider when deciding what is an acceptable level of performance. Some things to consider when creating your own performance indicators are:

  • Size of company
  • Existing quality management practices
  • Financial stability
  • Growth trajectory
  • Complaint history
  • Number of certifications

#4: Create an objective evaluation process

According to Sherry Gordon, author of “Supplier Evaluation and Performance Excellence,” supplier evaluation ought to quantifiably measure performance not just to see how well a vendor is meeting their contractual obligations, but also to identify areas of improvement. These could be areas where costs can be cut, Supplier Risk can be mitigated, and/or resources can be better utilized.

Along with a questionnaire and/or interview and site visit, an objective evaluation method should collect appraisals of several factors. The data from these appraisals should be organized using data management methods ranging from a simple spreadsheet to electronic RFP or tendering systems, for more complex evaluations. Some factors to include in your evaluation are:

  • Quantified results from questionnaire/interview/site visit
  • Resource capacity
  • Financial stability
  • Structure of the firm
  • Internal quality controls
  • Sell-thru levels

These are not the only factors you may want to consider. According to management consultant, Dennis Wright, evaluations may also include a discussion on “what [products] the company had been buying, how much it had been buying, what did that vendor have on the shelf or working on for push out six months or a year down the road and did it represent a significant improvement over what had been previously purchased, and what were competitors buying from a particular vendor.”

#5: Emphasis the partnership

Transparency with expectations and operations will make maintaining a positive relationship with your vendor easy. Entrepreneur and contributor at Inc. Magazine, Carolyn Brown, says, “Consider your suppliers and vendors as part of the team and treat them as such… Avoid supplier and vendor conflicts by paying on time or at least honestly addressing late payment issues and talking with your supplier or vendor about it.”

Remember that this should be a mutually beneficial relationship, so understanding your supplier’s expectations and needs should also be a priority. Regularly give feedback on your relationship; showing appreciation for a job well done is often more incentivizing than only pointing out problems, and can deepen your relationship.

 

#6: Know when to issue a warning and when to jump ship

Vendors, like any other company, will inevitably make some mistakes. Maybe they had a poor quality shipment or a less than perfect on-time delivery rate, does that mean it’s time to cut a vendor loose?

Not necessarily, according to Brown. She says, “You can drop a supplier for poor performance but strategically it is better to retain your vendors and not to flip around all of the time to replace them.”

Instead, issue a red flag or warning to give the supplier an opportunity to take corrective actions. Use the data you collected during your evaluations to do more than just criticize current performance, and assist the supplier in their improvements.

That being said, you established and communicated your expectations for a reason – because they are important to your business. If a vendor is consistently underperforming, despite warnings and working together to improve, it may be time to look for a new partner.

According to Greenblatt, “We give a warning and then put them on notice or a short leash before we cut ties completely. We will call the vendor and give them an opportunity to correct the situation. We will send them digital pictures, e-mails, and quality reports. So, there is no mystery when there is a challenge or an issue.”

Evaluating your suppliers can be a tricky business, but if you remember to emphasis the partnership – being transparent, involving each other in decision making, and knowing when to be flexible – both parties will want to work together to have a long-term relationship.

For more information on vendor partnerships or any other retail topic, visit our website at www.retailbound.com. You can also check out our latest news on Facebook, Twitter, and LinkedIn or email us for more information at info@retailbound.com.

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