Episode Transcript
I cannot over emphasis the importance of learning how to effectively work with vendors. By managing vendor-related projects well, you can help your departments meet its deadlines. Also, by negotiating well, you can save your organization lots of money.
Vendors can be categorized into two types; providers and strategic partners.
• Providers are companies were you buy stuff (stuff of course being the technical term for business related supplies and materials)
• Strategic partners are companies that play an important role in your success or the success of the company.
Examples of “provider” vendors are your office cleaning company, your office supply vendor (pens, paperclips, etc.) and catering company that delivers employee lunches. Examples of “strategic partner” vendors include companies that provide the raw materials for your products, offshore customer service centers and software companies that support your core business processes.
Provider-type vendors are generally judged on
• Price
• Reliability
• Customer service
• What I refer to as the pain-in-the-neck factor.
Reliability is the vendor’s ability to deliver the correct products on time at the agreed upon quality.
Customer service is the ability to respond to your needs and to deliver on their promises. As an example of quality service, if they accidentally deliver the wrong printer toner, will they send you the right toner overnight express, at their expense, so your copy machines don’t stop working.
Pain-in-the-neck factor refers to how easily it is to deal with the vendor and how often they aggravate you. Examples of aggravating situations include, taking months to get your bill right, shipping the product to the billing address and sending the bill to the shipping address, having three different salespeople call you on the same day and making you fill out needless and/or redundant paperwork.
At the end of the day, the only one of these items that you can really negotiate is price. The vendor’s internal workings and management ability usually define the rest.
When negotiating with provider-type vendors, negotiate on price, based on problems that you have had in reliability, quality of customer service, and pain-in-the-neck factors. Of course at some point, if the vendor just can’t do the job, find a new vendor, even if it cost you a little more money.
Strategic partner-type vendors are judged on different criteria based on the product or service they provide. For example, if your company assembles pens, then it is very important for the ink cartridges to be delivered on time.
Generally speaking, negotiations with strategic partner-type vendors include the creation of a Service Level Agreement (SLA). An SLA describes in detail the level of service that will be provided by the vendor. For example, a call center based SLA may specify that all incoming calls must be answered within three rings. Another SLA example is that specific raw materials must be delivered within a specified time after the order is placed. Very often the commitments specified in the SLA will be a major impact on the price. For example, a four hour guarantied response from a service vendor will generally cost more than a twenty-four guarantied response.
As a last thought, when dealing with your strategic partner-type vendors, cost is certainly always a factor. However, the vendor’s ability to deliver is much often more important, because if the vendor fails, it will have an adverse effect of your customers or your organization’s internal operations.
The primary advice and takeaways are to know that:
• Develop strong working relationships with your vendors is key to your success
• There are two primary types of vendors; providers and strategic partners
• Provider vendors provide non-mission products and services
• Strategic partner venders provide the critical products and services needed to run your business
• Maximize your vendor relationships by knowing the difference and treating them appropriately
