Success in business depends upon relationships. If your firm relies on a third-party vendor to keep things running smoothly, you need to ensure your relationship with that partner is rock-solid. Yet many companies don’t prioritize these relationships at all. As a result, 47% of collaborations with suppliers ultimately fail.
If you don’t take time to build trust with the vendors you rely on, you won’t get the most out of the products and services you pay for. Worse, you won’t get the benefits of being a preferred customer. So what’s the secret to building a mutually beneficial relationship that brings both businesses closer to achieving their goals?
It’s Business, But Make It Personal
Vendor relationship management is more than regular communication with the account managers at a partner firm. It requires getting to know the team you’re working with on a personal level. The next step is striving to integrate that partnership into your day-to-day operations.
If you’re constantly looking for ways to get the upper hand in the relationship by driving down costs or taking advantage of unbilled time with vendor specialists, you’re only hurting yourself.
Many executives view supplier services as necessary, but inconvenient, expenses that should be minimized whenever possible. However, strictly commoditizing a vendor’s offering undercuts the strategic value of the partnership. Instead, seek to maximize value by taking three steps:
1. Learn about your vendors’ businesses.
Both you and your vendor partners are trying to make money. If you’re always looking to squeeze single-sided value out of partner relationships by paying less, the quality of services they provide will suffer. They may even go out of business if you’re one of their biggest customers, and that’s not good for anyone. Rather than devalue vendors’ expertise, tap into it. Ask questions to better understand how they achieve their business objectives, and lend your own expertise when the opportunity arises.
Don’t discount networking opportunities with your vendors. At SMC3’s annual Jump Start conference, for example, supply chain executives come together to exchange knowledge and discuss their industry’s future. Attending these types of conferences with the vendors you work with is a great way to learn about your partners, build camaraderie, and strengthen your shared purpose.
2. Invite vendors to strategize with you.
Collaborating on business strategy and working with vendors to streamline processes will benefit everyone involved. Plus, it’ll make your company more competitive and resilient. Even vetting a workflow with your vendor can improve results, giving partners bigger stakes in project outcomes.
Toyota is the world’s largest carmaker by market cap, and its sterling reputation for vendor relationship management is no doubt a big reason why. Company leaders know Toyota’s suppliers and co-developers around the globe are vitally important to their business’s success. That’s why they hold frequent executive review meetings and KPI reviews with their partners. These ensure that expectations are always clear and both parties benefit from the relationship. They participate in supplier research and development shows and attend conferences with suppliers their vendors use. The payoff? In a time of economic uncertainty for automakers, Toyota and its partners can be confident in their relationships and plan for the future together.
3. Remove barriers to working together.
No matter the circumstances, pay your vendors in a timely fashion to reduce their risk in working with you. Moreover, it’s wise to regularly meet with vendors to address any perceived barriers — current or future — to working together. There are plenty of automated vendor management tools to streamline processes vital to strengthening vendor relationships.
And that’s a good thing, as more success typically means more vendors to manage. Take Touch of Modern, for example. The men’s e-commerce app experienced significant growth soon after its launch and needed a way to quickly pay an increasing number of foreign suppliers. The company used global payable automation platform provider Tipalti to automatically upload invoices and distribute payments, reducing the time and chances of error associated with paying vendors. The ability to schedule payments in advance significantly improved overall cash flow, ultimately helping Touch of Modern grow into a leading men’s fashion site with more than $140 million in annual revenue.
Not all vendor partnerships will prove fruitful in the long run, but by taking the time to get to know vendors, you stand a better chance of building beneficial long-term relationships. And relationships are key to your success. In an increasingly competitive global business environment, collaboration is how the best businesses win.