08/30/2023
Most companies use vendors at some point, especially during times of expansion when existing processes, technology, and employees are unable to support growing demand. Vendors can save the day by providing specific skills or resources. On the flip side, relationships with vendors can quickly become less productive when there are misaligned expectations, quality standards, and communication practices. In other words, a successful vendor relationship comes from effective vendor management.
PITFALLS OF POOR VENDOR MANAGEMENT
When demand exceeds what a company’s internal resources can handle, it’s time to bring in outside partners. However, those partners come at a cost. There are expected costs, like paying for labor and materials, and unexpected costs, like paying internal resources to oversee the vendors and their work. Strong vendor management can mitigate these unexpected costs.
For example, undefined internal standards about the quality of a deliverable can lead to multiple rounds of rework or, worse, an unusable product. In addition to the financial cost, this type of back-and-forth can lead to missed deadlines, change orders, and overall frustration for internal and external resources. Establishing those quality standards from the outset of the project can prevent this scenario.
SET RELATIONSHIPS WITH VENDORS UP FOR SUCCESS FROM THE BEGINNING
A successful vendor relationship starts with the procurement team responsible for identifying the company’s needs. This team should have a realistic look at the business challenges facing all levels of the organization so they can bring in the right number of resources with the right type of expertise.
Once the procurement team has identified the resources, contracting can begin. This phase is an excellent opportunity to set expectations between parties. Some items to address during the contracting phase might include:
- Setting quality standards and methods for status tracking, reporting, and communication
- Aligning expectations for on-site versus remote work
- Defining and documenting essential milestones and key outputs
- Establishing support plans during unexpected or critical circumstances, including the defined Service Level Agreement (SLA)