SOME POINTS ON VENDOR RELATIONSHIPS

SOME POINTS ON VENDOR RELATIONSHIPS, PRICING AND OTHER FACTORS

It is important to establish good vendor relationships in order to derive future benefits on such factors as pricing, delivery, freight and quality. While it is perfectly acceptable to use digital technology to establish the initial point of contact with a new supplier, one on one meetings/telephone calls are better methods in establishing rapport. Vendors are integral to your team and your customers and must be treated as such, showing them the respect, courtesy and appreciation for good service and products that meet your company’s needs. The best way to accomplish this is to pay on time. If this is not feasible, let your suppliers know right away and work on favorable terms amenable to both parties. As partners, each must understand the needs and expectations of each of their respective companies.

Prior to interviewing potential vendors it is important to define all the critical elements that you need to know from your meeting. You want to make decisions about products based on your functional needs and how closely a particular supplier can match or exceed your company’s requirements. Write down the top 10 or 20 functions you want a supplier to do for you, i.e., on-site support/training, ease of doing business – customer service availability/support, order placement, flexible payment terms, offsite storage, depth and breadth of knowledge of product, industry and market share, professionalism of salesperson, investment into R & D or technology, etc.

Make a scorecard of functional requirements. Turn your wish list into a scorecard, with room to write notes bye each category for each vendor that you see. Develop a simple scoring system (1-5 will do) and assign a value to each category based on the feedback provided. Evaluate all vendors based on the same criteria. A salesperson should be eager to discuss the potential opportunity to with the buyer. After each interview, you should have a confident, informed feeling with respect to which vendors can initially meet your company’s requirements. An RFI will glean additional information as to whether a supplier can most likely provide the product or service requirements of your business.

Of course, pricing is the key to maximize profit, but a buyer’s decision should not be based solely on price. He or she should consider functionality, ease of use, style, durability, reliability, the manufacturer’s or vendor’s reputation and business establishment, financial viability, delivery time, payment options, guarantee or warranty and the trustworthiness of the salesperson. Some examples are as follows:

A certain minimum order may qualify for prepaid freight. If an order is just shy of meeting prepaid freight requirements, and the part(s) will be used in a relatively short period of time, then a buyer should have some discretion to increase the order to have the freight paid by the supplier. If a supplier can guarantee delivery within one or two business days and the item(s) is needed immediately to avoid production down-time a buyer should also have the flexibility to authorize the additional expense for immediate delivery.

Defective or incorrect items incur additional costs for warehousing, production down time, and/or return processing. If the product is defective, a buyer should seek remedy from the supplier and notify the accounts payable department to place the invoice on hold until the buyer has been advised of the supplier’s cure – vendor arranges to either pick up the item(s) or authorizing the buyer to return item(s) back to the supplier’s facility, via freight collect. The buyer should request a replacement of defective or incorrect parts, to be delivered within a reasonable period of time. If supplier cannot fill replacement within specified time and item can be obtained from another supplier within the necessary delivery time, then the buyer should seek a credit from the initial supplier to offset the pending invoice, and place order with secondary supplier.