In the world of business, evaluating whether to create a legally binding partnership with a party, be they a vendor or a client, is crucial. Partnering with a company will have long-lasting repercussions. It can affect your business operations, your branding, your reputation, and most importantly, your sales.
It then goes without saying that you shouldn’t make deals with just about anyone as there are consequences for each action. Falling into a legal agreement with an incompetent vendor can set your sales back a few notches. This dilemma may affect the future standing of your company.
Vendor management goes way beyond calculating the Return-On-Investment of your vendors. No. It does way more than that. Integrating a vendor management software in your business operations is one of the smartest things that you can do for your company. Managing a business requires a lot.
The entire process of vendor management has various steps. It encompasses many functions such as sourcing vendors, getting price estimates, turnaround times, Key Performance Indicators, contract negotiations, and a thorough performance-to-cost ratio. There’s also the extra task of guaranteeing that all financial obligations have been paid.
This article will focus on how to find vendors with the highest ROI for your company. Here I have listed down some tips that successful business owners swear by on how they chose the best vendors for their organization.
Avoid Red Flags
Schedule a personal meeting with your vendor. While online communication has definitely made negotiations much more convenient, it’s recommended that you meet with the other party at least once. It’s quite difficult to sniff out red flags through emails and calls but they can be seen from a mile away during a meeting.
There are three red flags that you must look out for. If you sense any of them from the other party, take it as an indication to not push through with your deal. The first red flag to look out for is the time of arrival and their appearance. The adage goes “don’t judge a book by its cover.” However, as this is a professional meeting, both parties must exercise full professionalism. That means arriving on time and in proper attire. If they arrive late, that’s already an indication that they do not value your time. This can result in late deliverables that affect your entire operations.
The second red flag is when vendors over-promise their ROI. Before going into a meeting, do some research on attainable metrics. If the person you’re meeting is overselling his service, take it with a grain of salt. Oftentimes, you’ll be set up for disappointment.
Lastly, never go on an agreement with a party that doesn’t state their ROI. This either means that the ROI is bad and reporting it would turn you off or worse, they don’t do enough research to actually determine their own ROI.
Update Evaluation Techniques
Many companies are using outdated evaluation techniques that ultimately leaves the company vulnerable to vendors with poor ROI. It is high time to update these techniques and do away with the old practice of focus deliverables that do not contribute to the overall business value and closed-door evaluations which lead to bribes and shady dealings.
So do not be swayed by your vendor’s impressive track records, especially if they haven’t been able to bring the same numbers for your company. Do not let them lead you on during the interviews and meetings. Always take control of the conversation and probe them to get real answers and results. Here are some suggestions for you to revise your evaluation system:
Periodically check up your vendor’s reputation and see what the customers have to say about them through reviews and see their responses. If they have a poor reputation or there have been cases of mismanagement, it might be better to look into other vendors instead.
2. Value-Based Partnership
When you make a contract with your vendor, make sure to clearly outline what you expect from them and keep it a value-based partnership.
3. Key Performance Indicators
The best way to uphold the value-based partnership and assess their performance during evaluation season is to set up key performance indicators (KPIs). When setting your KPIs, remember that it should be customised according to your goals, and they should always be measurable. Your management software can help you keep track of your KPIs.
Keep the communication channels between you and your vendors clear and transparent. You can assign a point person, to keep both parties accountable for any issues with the contract, non-compliance, and inadequate information dissemination.
5. Address Non-Compliance
Address any non-compliance issues immediately. And like the KPIs, you can use your management software to keep track of this. Every time you let their non-compliance pass, it leads to more loss on your part. Nip it at the bud and do not be swayed by fear, uncertainty, and doubt (FUD) arguments.
Moreover, ensuring contract compliance is vital in providing insight into your company’s procurement processes. This guarantees that all contract management goals and objectives are met. It also helps facilitate better negotiations with suppliers and service providers, which in turn can lead to higher company savings, among many other benefits.
6. Surveys and Evaluation Forms
Regularly gather data by sending evaluation forms, surveys, and use your management software to track their performance. The answers can help you identify if it is poor vendor performance, or if there are issues with your product or business approach.
Updating your evaluation techniques is the best way you can assess your vendors. You can use the information to make all the necessary changes and help your company grow.
Never Settle For Anything Less
The evaluation will be an empty gesture if you do nothing with the information. If you want to work with vendors with high ROI, you have to adopt a hard stance. Never settle for anything less and create a system that weeds out vendors with poor performance.
However, the burden does not just fall on vendors. The evaluation system also means you have to hold up your end. You have no excuses when it comes to inferior products and inefficient business practices. If the answers on the surveys and the evaluation form are consistently bad across the board, it is time to make changes in the company to give it a fighting chance. You can get a much-needed boost from these changes.
Refusing to settle for anything but the best does not make it hard to work with you as a company. On the contrary, your new reputation can help attract vendors with a high ROI. All it takes is a bit of extra work.
Finding the vendors with a high ROI is not easy, but when you find them, the partnership is very rewarding. You can learn a lot from them and adopt some of their business practices and improve your overall sales. So avoid the red flags, update your evaluation techniques, and never settle for anything less–with all those three tips working together there should be no reason you cannot find vendors with high ROIs.