Why Vendor Management is Crucial to Your Customer Experience

 

What happens if you can’t get the materials you need, from an exclusive supplier,  to build your widget because you’re way past due?

They may help you if you have a good relationship with them.

Simply put, realizing the role that your vendors play in the product or service that you offer to your customers is critical and can directly affect the customer experience and your company’s success. Selecting vendors and developing strong, long-term relationships will vary for different types of vendors and businesses but regardless requires many considerations.

Below I’ve outlined some key considerations in identifying key vendors and the benefits of building solid relationships.

Types of Vendors

All vendors don’t need a “relationship.” If you’re purchasing a stapler, you can shop price. If you have an account rep with a supplier, however, having a good relationship might get you better service or extra effort if there’s a problem but worst case, you can try another supplier if they can’t help you.

The vendor that is your data center, however,  becomes a “partner” with your company. Key vendor relationships are crucial and not simply about price. An issue with key vendor can dramatically affect the product or service that you provide. You can identify a key vendor with a Risk Analysis.

Risk Analysis

Performing a Risk Analysis helps you identify and select key vendors. Your management team should research and answer three questions which will raise many other questions:

1) What would happen if you needed to change a vendor such as your telecom provider or cloud storage provider, in comparison to your office supplies vendor?

2)What are the odds of you needing to do so?

3) What would the process involve?

Changing a key vendor may need months of planning and a painful, costly process that may disrupt service to your customer. A Risk Analysis will help you understand the risks, plan a contingency if possible and help mitigate the chances of a nightmare.

 Vendor Selection and Negotiations:

The selection process varies for each company and for different types of vendors. Your company must decide on the key factors that matter most for selecting a particular type of vendor. That can vary from their SLA (Service Level Agreement) to a D&B Rating to how long they have been established.

Consider issues that you have had in the past with other vendors. Regarding intellectual property, consult legal representation during the process and certainly before signing any contracts. If applicable, does the vendor meet required regulatory or security compliance? In some cases a site visit might be considered. Websites and brochures are sometimes misleading.

Never choose a key vendor on price alone and try to avoid beating them up on price. Negotiate a win-win. Beating up a vendor may come back to bite you in ways that you cannot afford.  The selection and negotiation process will help keep you in the driver’s seat to prevent you from being held hostage by a key vendor, which can happen.

Monitoring Vendor Performance

Once the company has selected the vendor, monitoring their performance is key.  Gathering KPI (Key Performance Indicators) differs for every type of vendor but knowing how they are performing may help fine tune their service and may even give you an edge when renegotiating the contract. Monitor everything from customer experience to gathering technical specifications if applicable (i.e. Are you actually getting the 100MB bandwidth from your ISP?)

Life-cycle

Monitoring performance is part of managing the life-cycle but also evaluate what other value the vendor adds. Look past the SLA and decide if the vendor added value to the relationship, which comes in various forms. One measure is when there is an issue. How did tech support or customer service handle it? Also, revisit the selection process. What would your company change or add if it had to select a new vendor? Managing the life-cycle may cut costs, help fine tune their service and strengthen the relationship.

Contract Management

It is crucial to have all vendors categorized by the role they play or the product or service they offer. This will help avoid overlaps and duplications that may save tens or even hundreds of thousands of dollars. Also crucial is having copies of all contracts and being aware and notified of renewal dates.  An expired license can pull your website offline and potentially lead to losing your domain name.  Knowing renewal dates will also help being ready for re-negotiating a contract.

Accounts Payable

I understand the financial impact of delaying accounts payable beyond 30, 45 and even 60 days, however, strongly consider staying current with your key vendors. It can help during contract re-negotiations if you’re viewed as an excellent customer. It may also prevent delays with tech support. If you’re overdue, a vendor may require a current account for tech support.

In summary, view Vendor Management as part of your customer experience business strategy. Recognize the values of a Risk Analysis,  the selection process and building strong relationships with key vendors. Recognize the issues that can be avoided. Avoid having scattered contracts. It is costly when the left hand has no idea what the right hand has just signed. Taking the measures that I’ve outlined above will help your company yield long term benefits and cost savings through a strategy of managing vendor relationships.

– Please read my other posts for ways to help improve your company’s customer experience and share it if you’ve found it helpful.

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About the Author

Gerry Criscenzo, founder of Advanced Service Knowledge is passionate about delivering an exceptional customer experience.  He has over 30 years experience managing customer facing teams in very demanding customer service  industries such as automotive services, IT Services and Home Remodeling/Contractor Services. Gerry is available for consulting, keynote speaking and training.  Read more

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