Vendor Management Best Practices: Measure Twice, Cut Once

Published : January 21, 2015

man-measuring-piece-of-woodHow dependable are the vendors in your current or considered ERP setup? How about the ERP setup itself? Modern business is too competitive and moves too quickly to guess at efficiency quotas. Success is measured in fulfillment percentages and fast implementation of backup plans when an industry-level crisis threatens to knock both you and your competitor back to square one.

If you don't know the numbers, you don't really know your business, and putting supply chain quality control measures in place successfully is practically impossible. Starting off on the right foot with your vendors and making your needs and expectations known will smooth out these ripples and save you considerable headaches later.

How Much Does Each Side Know?

Getting the best relationship results from working with your vendors means striking a careful balance of gathering information about their real-time efforts while safeguarding your own proprietary information.

If you know too little about one another, your vendor can't grasp where they fit in your supply chain, and you will lack the transparency you need to communicate with other supply chain nodes. Too much information can overload your data with unnecessary contributions, or may even put your company operations at risk for sly negotiation techniques down the road or idle snippets of information making their way to a competitor.

As Paul Roberts posts for Veracode, giving your vendors a peek into a system your own people don't truly understand can also be a security risk— federal agencies in particular are exposing themselves to hackers with a lack of inherent knowledge of their own ERP systems.

It doesn't take much of a leap to extrapolate this federal issue as a warning for corporate supply chains.

Discuss Contingency Plans in Detail

Implementing alternate solutions when confronted with a supply chain shortage or disruption should be as easy as switching tracks on a runaway train— so is your company ready with a hand on the lever or will you be frantically laying down tracks when an issue arises?

If you haven't discussed your "Plan B" in detail with your vendors, you'll be facing down that barreling train with nothing but planks in your hand. Consider each major contribution a vendor makes to your supply chain and have another option— even if it's a little more costly or harder to obtain— waiting in the wings to take over if a company falls short. Not only will this stave off the more unpleasant results of a disruption, it can also be a useful bargaining tool in future negotiations. You might be able to swing a better price or promises if a vendor knows they're not the only game in town.

Step Back and Look At Your System

It's very easy to get so caught up in vendor examination and testing that you neglect to scrutinize the system they fit into. The uncomfortable truth is that your ERP setup might be the hiccup in your vendor management best practices, and not the vendors themselves.

If all of your vendors are square pegs and your system is nothing but round holes, you're sacrificing efficiency and effort by trying to force the majority to fit the minority. Listen to feedback from your vendors and remember, as Stephen Phillips writes for TechTarget, that just because an ERP system labels itself— or even if it's labeled by industry insiders— as "best of breed," that doesn't mean that it's the best choice for your needs and company.

Formulating and depending on your vendor management best practices to deliver means having a system that's transparency-balanced, makes logical sense, and uses backup plans to minimize disruptions. If you're not hitting all three targets, you're putting yourself at risk to miss many others.

Free Guide - 5 Questions to Ask a Potential Fulfillment Partner

Topics: Vendor Management

Get the Guide Now to Build a Sound Warehouse Operations Strategy

Subscribe to Email Updates