4 Vendor Management Best Practices

Choosing the right vendors is often critical to your company's success. Disorganized partners and bad relationships can lead to costly performance interruptions and even ruined reputations. Sometimes vendors are selected in haste or the firm that is offering the lowest price is chosen, but the old saying that you get what you pay for must be heeded. Here are four best practices when it comes to vendor management:

Examine Your Options

In some industries, there may only be a handful of vendors from which to choose. However, in most cases, there should be plenty of competition and it is important for companies to do their homework before making their decision. Of course, companies must first assess their needs and narrow down potential vendors based on the pertinent criteria. It is crucial for companies to select vendors whose offerings most closely align with their unique needs to avoid having to contract with a bunch of different parties. In some cases, fulfilling the company's needs may require multiple vendors, but consolidation is obviously ideal, as it lessens confusion and will likely allow for cost savings.

Focus on Fit, not Flare

A lot of vendors will no doubt pull out all the stops to induce a company to engage their services. All of those bells and whistles can be quite enticing, but it is vital to look past the flare of the presentation. This is particularly important when things appear too good to be true because they probably are. The primary focus must be on the overall fit between your company and the prospective vendor, and clearly price will be an enormous factor. The key is to keep the focus on the big picture and to avoid getting bogged down by some of the more trivial details.

Negotiate in Good Faith

It is absolutely vital to start off a contracting relationship on the right foot. Unreasonable demands and dishonest negotiation tactics can easily ruin a deal before it even materializes. Granted, parties may be willing to move forward if they are able to look past these sorts of things, or they may simply be desperate for the business. Nonetheless, they will no doubt proceed with extra caution if they feel things seem awry. That obviously is not the best way to go about handling a transaction, and it is easily avoided by simply negotiating in good faith from the get go and throughout the course of the relationship.

Evaluate and Communicate

Ongoing assessments and consistent communication are central to successful contracting relationships. The only way to ensure that a company's vendors are delivering as expected is by periodically examining performance and sharing status updates. Unfortunately, it is common for one party to try to gloss over potential issues or avoid bringing them up in the hopes that they can get a handle on things, but this rarely works out in the end. Thus, there has to be an honest assessment of how things are going and frequent, direct lines of communication.