When starting a new business, you should consider the importance vendors will have in the future of your company. If you’re a small business owner, you probably already know how crucial vendors are.
All activities a company does that are related to vendors, including sourcing and choosing vendors, managing contracts, and relationships, having meetings, and managing orders and payments are called vendor management. All these tasks are very time consuming, and usually, a vendor manager is appointed to lead them.
Despite being a strenuous process, you should dedicate some effort to it because it can make or break a company. Here are 5 crucial aspects for effective and productive vendor management for small businesses.
1. Choose Wisely
Price isn’t everything. Choosing the best vendor for a given situation is not just about searching the lowest value on a list. Recognizing this is the first step for successful small business vendor management.
There are several important factors to take into account when selecting a supplier. These include reliability, quality of service and value for the money. It is important to keep in mind that if you can’t count on your vendor and he delivers a poor service, you won’t be able to manage your stocks properly and will let your customers down. At that point, excusing yourself with a poor supplier will do you no good.
When scouting for a new vendor, you can start by narrowing down your options and making a sort of favorite list. Then, gather deeper information and get into contact with each one of these favorites to find out which one better suits your needs. Also, make sure their goals are aligned with your company’s.
2. Involve Vendors in Your Strategy
Based on what we’ve just said, it is a logical step to involve the vendors in the decision-making process.
Remember that the idea is that a quality vendor brings value to your company. If this wasn’t the case, you’d just select the cheapest one on the list.
As a part of small business vendor management, you should actually invite key vendors to strategy meetings. They are already experts and probably have more experience than you, so they can provide some insight into how the market works and what your approach should be. Also, by developing a strategy together, you may find a solution that is more profitable and efficient for both.
3. Manage Your Inventory Properly
Small business inventory management and vendor management are closely related. There is no point in choosing a great supplier if you are unable to keep track of your own stocks.
By managing your inventory efficiently, you’ll be able to relay information to your vendors quickly and accurately and replenish your products in a timely fashion. A good inventory control software or an app can help you keep a close eye on the matter. You can even link kit assembly orders to vendor purchase orders.
One approach you can try is to have a Vendor Managed Inventory (VMI). With this system, the vendor has access to your sales and inventory records and is responsible for sending stock as you run out. You can do some research on the advantages and disadvantages of this method and see if it suits your strategy.
4. Communicate Often
Besides physical meetings, which we’ve already covered, communicating on a regular basis is another crucial factor in small business vendor management.
Sometimes issues may be surfacing that the vendor has no information on and has no way of knowing about. By letting them know what is happening you can act preemptively and keep it from turning into a real problem.
Talking to suppliers regularly also allows you to keep your priorities aligned, update status on orders and payments and keep track of task progress.
5. Keep Your Horizons Open
Relationships and agreements with your vendors are not set in stone. While it is important to be able to rely on them, you should remember not to trust your suppliers blindly.
In small business vendor management, you should always study and reassess your options. If a vendor no longer has competitive prices, schedule a meeting to evaluate the possibility of a renegotiation. But remember, bending your will to the vendor’s wishes may also be fruitful in some situations. If they are able to trust you, the benefits may be greater in the long term. Each situation is different, so decide wisely and your business may bloom.