Building strong relationships with your vendors and suppliers goes a long way when running a business. Good vendor relationships can lead to:
- Greater trust between the two companies.
- More consistency and reliability in the products or services received.
- Improved communication.
- Personalized customer service to better fit your needs.
- The potential for exclusive discounts or faster delivery.
- Early access to new products or services.
- A longer-lasting working relationship.
Almost every business relies on vendors to succeed. So, you might as well try and maximize those relationships, even if it just leads to a better working experience without any direct financial gain.
Below are five tips for building stronger vendor relationships.
1. Pay in full and on time
Ultimately, this is a business relationship built on a simple transaction: the vendor provides a product or service you need, and you pay them for it.
With that in mind, the simplest step to building a strong relationship with your suppliers is to always pay in full and on time. No one likes waiting around for their money, and you may even be able to negotiate an early payment discount for prompt payments before the net terms laid out by the vendor. Paying promptly may require reorganizing your cash flow, but the funds saved are often worth it.
You can improve cash flow management when paying vendors by choosing the right payment method. This includes making a free ACH payment that arrives in one to three business days.
2. Develop mutually beneficial relationships
A lot of businesses focus solely on driving down their supply chain costs and hunting the best prices. While this comes with obvious short-term benefits, it can lead to a drop in quality in the long run. Plus, continually jumping between suppliers means you fail to build a relationship with your vendor and potentially miss out on benefits.
When negotiating with a vendor, you should be upfront about your needs while also trying to understand the business relationship from their side. Identify their needs and accept compromises as long as they have a minimal impact on your end.
The best and longest-lasting business relationships are mutually beneficial for everyone involved. You want to structure the partnership to be profitable all around, with both sides invested in making it a success.
If one party feels like they’re being taken advantage of, they may find ways to rebalance the arrangement, cutting corners and missing delivery deadlines, for example. In contrast, a win-win business partnership is too valuable to throw away with sloppy work, whether it’s intentional or accidental.
3. Communicate efficiently
Ensure there is regular contact between you and your vendors. This should not be a one-way street, with you dictating your expectations without listening to their feedback. Look to engage suppliers in two-way conversations that foster meaningful communication channels and an atmosphere of collaboration.
However, when developing the service level agreement (SLA) or statement of work (SOW), you’ll need to establish roles and responsibilities as well as specific communication channels should issues arise. Make expectations clear from the start and get them in writing as part of the contract. If a problem does occur, address them quickly while remaining professional.
Poor communication is often the root cause of business failure. Both sides need to feel like they can communicate openly and honestly while being open to feedback.
4. Involve vendors in the process early
A good way to gain organizational buy-in from your vendors and build a strong partnership is to involve them early on in the process. Plus, suppliers in your industry will have a wealth of knowledge that could be beneficial when developing a new business plan. The nature of the vendor relationship is that they’re supplying something you do not have in-house, so why not see if you can extend the partnership to include knowledge transfer that enhances future growth?
5. Play the long game
Treating vendors as long-term partners leads to stronger relationships.
In the modern business world, no one is immune to supply chain interruptions. If your vendor is having problems providing goods and services, who are they going to offer them to first? Who are they going to go out of their way to help?
The new client, who only talks about driving down prices? Or the company they’ve worked with for years? Treating vendors well often leads to unexpected benefits, making it beneficial for you in the long run.
Listen to your vendors’ individual needs
While these tips are a great starting point for vendor relationship management, don’t assume every vendor is the same. Listen to how they like to work and, where possible, adapt to meet their needs. Again, showing that you can listen and work with them rather than expecting your goods to arrive at the snap of your fingers will lead to a healthy and successful partnership.