Vendor Management Processes Are Key to Maintaining Profitability

May 16, 2012 by  Filed under: Management 

Making profits is the main objective of any business, and there are many ways of doing this. Others capitalize on marketing and salesmanship, sometimes through value-added products or services; rarely, others use limited expenses. In any case, businesses also utilize vendor management. A business would be fortunate to have a supplier who is located near its manufacturing plant or headquarters. It lessens the cost of having to transport supplies when the arrangement states that the buyer shall shoulder the cost of procuring the needed items. Low transportation costs equate to a competitive advantage for the producer or retailer.

However, more than the location of a supplier, keeping them satisfied also keeps the purchaser’s business profitable. As a supplier, they are also part of the purchaser’s business. If the supplier runs into problems with its production, this can adversely affect the purchaser’s business. On the other hand, if the purchaser re-invents or redesigns a product, it would be prudent to notify the supplier of the purchaser’s plans of doing so. The supplier may still come up with the raw materials needed by the purchaser. The purchase may even be discounted or at favorable terms to the buyer. In this way, vendors can keep up with the demands of the buyer.

If the new demands of the buyer are not in league with its supplier, finding a new one can sometimes be tricky and stressful. First off, the team of purchasers should define exactly what the business needs as well as the suppliers who might be able to fulfill that need. When a pool of possible suppliers is met, the buyer can further seek for information regarding the supplier. This will be an opportunity for the buyer to ask if the supplier’s products meet with the standards set by the buyer as well as government agencies. Their compliance as to the buying company’s policies is also scrutinized.

When the supplier passes the scrutiny, including the submission of quotes and proposals, the negotiation can proceed. In a profitable vendor management process, getting the lowest price is not the only major determinant in getting the vendor to agree to the terms set by the buyer. A compromise may be called for during the negotiation. If the supplier sees that the buyer is in for the long haul, the supplier might also make concessions. The negotiation can end up with an agreement that satisfies both parties.

Procurecon is a great place to evaluate different vendor management solutions for the supply chain; learn more on our web sites.

Article Source:
http://EzineArticles.com/?expert=Jeremy_B_Thompson

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