Shop Talk (Nov. ’14): Supplier/Vendor Relations Management

0 Rick Rossetti

When my business partner Adam Brown and I started Sign Effectz, Inc. in the mid-1990s, we decided to make vendor management a key part of our overall strategy for running the company.

Of course, back then we weren’t in the practice of calling it “vendor management.” That label didn’t come along until years later. But the underlying belief was there: doing business with the right suppliers was going to be a big factor in whether our company was going to be a success or not.

In this article, I’m going to share what I’ve observed and learned over the years about the characteristics of great vendors and some tips for managing relationships with them.

Invest Time & Energy

Good vendor relations mean value is added on both sides of the relationship. The upsides to us are many.

In a healthy relationship, vendors are proactive in letting you know about innovative new products that hit the market. For example, the first time we hear about new LED products for gas station canopies is from our light supplier.

Sometimes our installers hit a rough patch such as when there is a product failure in the field. In a great vendor relationship scenario, they work their hardest in getting a replacement product. The value of this is huge because it ties directly to our customer’s satisfaction level. Bottom line, it helps us keep our customers satisfied.

Our best vendors alert us when they see patterns develop in the failure of their products in the field. This puts us in a position to implement a few risk mitigation strategies. Our guys in the field can keep an eye out for failures, and we can stock more good units of that component on our trucks. That’s a dramatically faster and better way to handle issues than to be reactionary. We’ve seen this quite a bit with some power supplies.

An often overlooked or underutilized benefit comes when a vendor connects us with the right specialist. Every now and then we need a new, hard-to-find product solution.

Our best vendors are more than happy to introduce us to other specialized vendors that can help us out. Typically those introductions are to prospective vendors that are of equal caliber to our current suppliers and are very well-qualified to deliver excellent product and customer service. I love how this broadens our own network with the network of others.

Take The Long View

Vendor turnover has never been an issue for us. That’s because we take the long view. In fact, I have vendors that have been working with Sign Effectz, Inc. since day one.

I think long-term relationships are great. Your vendor gets to know your business. They can anticipate what you need. My best vendors review annual order histories with me and my team. We use that data to plug in the right prices into our costing system and for monthly budgeting. These give company leadership the indicators they need to monitor how the business is performing.

The mindset they have at N. Glantz & Son (one of our vendors) is the same. Steve Thompson, the sales representative that handles our account, says, “I do whatever it takes to retain customers like [Sign Effectz, Inc.] and maintain long-term relationships. I know what they expect and what they use. Each sign company is unique [in] how they work and how things flow through their facility. It’s my goal to keep them happy and meet all their needs.”

Long-term vendors don’t creep up prices without letting you know. Just look at aluminum. Aluminum pricing has been dropping over the past year.

A good vendor won’t hold you to a price that was determined a long time ago. They know that if they can drop a price, they will. This reduces our cost and makes our customers happy because we pass the savings on to them.

New vendors come after our business; some of them sound great at first, but price can creep up over time. Needless to say, we avoid those situations.

When you start with a new vendor, you have to be vigilant on the front end, when the business relationship is still forming. Be sure to monitor the pricing and delivery. Having your own internal cost system is key. I can tell exactly how much I spend by each vendor each month. I have great access to purchase and frequency data including what I paid for any given component.

Conclusion

Finding the best vendors isn’t always easy. They’re the ones that are dependable and willing to work with you. They respond on a regular basis, and you don’t have to hound them for a response. The absolute best scenario: I can shoot an email on estimating and order status to my vendor and get a response in under an hour. Their attention to detail is appreciated too; for example, having the correct number on all purchase orders.

The best vendors have the parts you need on the floor so you don’t have to wait a week to get product. That helps us manage our work load tremendously and service our customers better.

My tips for vendor management:

Good communication is very important. When it comes to vendor communications, I’m not all business. There is some social interaction; I get to know them, even if it’s not always on a super personal level. They look forward to getting our phone call.

Pay bills on time. It helps maintain good relations with vendors.

Loyalty counts.Avoid bouncing from vendor to vendor throughout the year. It doesn’t inspire loyalty, and it certainly doesn’t get you the best volume discounts.

Know what you’re ordering. Get very familiar with your purchasing data and monitor it on a regular basis. This helps you avoid any confusion over inventory or waste in the process.

0 Rick Rossetti—Rick Rossetti

Rick Rossetti is vice president of Sign Effectz, Inc. (www.signeffectz.com) in Milwaukee, Wisconsin.