When Should You Dump an Underperforming Vendor?

Published : July 24, 2015

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Parting, in interpersonal relationships, may be sweet sorrow according to the Bard, but in business it can bring a huge sigh of relief. Vendor management best practices place a great deal of focus on how to manage and optimize the existing relationships your supply chain depends on, but they may fall short on guidance when it comes to when you should cut an underperforming vendor loose. 

Severing business relationships is never easy, but much like a dead tree branch must occasionally be pruned to ensure the tree stays healthy, knowing when to call it quits with troublesome vendors is a skill worth cultivating.

1. When Your Vendor Impacts Your Profits

Much like your customers trust you to provide a quality product or service that performs as it was advertised, you depend on your vendors to provide the components and services that facilitate that. 

If carelessness or corner-cutting on their part leaves you with problems that force recalls or repairs, it's time to consider how much your relationship with that vendor is really costing you. Even if a vendor "makes good" on their mistake with a credit, the impact of your lost time and negative brand perception may not be so easily fixed. If several mistakes like this have dotted your working relationship and your vendor doesn't seem eager to change their processes to prevent another, it's probably time to move on.

2. When Your Vendor Impacts Your Efficiency

When you put vendor management best practices into play, you rightly assume that a vendor will hold up their end of the bargain—delivering goods on the stated timetable, communicating transparently about delays and preventative measures and generally keeping in touch without prompting. If your vendor stubbornly holds their cards to their chest, or is lackadaisical about communicating future plans that could impact their output or fulfillment, you're left in the dark—not exactly an enviable position for a business on the move. 

If you find yourself frequently asking for tracking information, waiting for email responses that never come or leaving unanswered voicemails, it's time to examine the level of respect and professional courtesy your vendor is operating under. As Joel Breen notes in iMedia Connection, secrecy and unreliable performance are generally earmarks of a business relationship about to go sour.

3. When Your Underperforming Vendor Makes Your Company Look Bad

Consumers are intelligent and can fact-check, research and review right from their smartphones before making a purchase—and 60% do, according to a Nielsen study quoted in the Washington Post. In this brave new world of the informed consumer, vendors have become an extension of brand identity and, thus, equal parts a benefit and a liability, depending on their own brand identity. 

In new vendor partnerships, a conduct contract will help put fears of ecologically unsound production or other scandals to rest at the negotiation table. If, however, an existing vendor is making negative headlines and there's no contract in place? It's time to step back and distance your brand from those problems. Even a small issue, if it's a persistent one, runs the risk of embroiling your perception capital in a long, difficult stint on the news and discussions about misdeeds that you definitely don't want your name to be linked to.. 

Your vendor management best practices shouldn't begin and end with pricing and fulfillment—the ease of working with a vendor is part of the value you receive. If you could ask a disgraced company if they could retroactively walk away from a vendor company that brought them down with the ship, it would likely be an easy choice. 

Cost is about a lot more than the bottom line, and in that light, the difficult choice to separate from a vendor isn't always as expensive as it seems.

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