Every business operates with a basic aim i.e. to make profit. For profitable business, steady and dependable vendors are required. The vendors are the closest point of contact to the consumers. A well managed vendor relationship will ensure maximal consumer satisfaction. They form the architecture of sales, once the product is set to be released in the market.

Let’s consider practices for best management of vendors.

1- Selection of Vendors

This is the first and most important step in vendor management. Prior to the selection, one should have in depth knowledge about the product, cost, profit margin etc. Vendors can be selected on the basis of following.

a- Past experience.

b- Recommendation by consumers.

c- Good sales potential.

d- Vendor approaches the company.

e- Market intelligence1.

2- Working contract

This needs to be carefully constructed to ensure a strong architecture of vendor team. Contracts can be signed as short term or long term contracts. Initially, while starting with a new vendor team, small term contracts are recommended. In case the vendors ask for minor clauses to be put, it is good to comply with the vendor, as this builds trust. Avoid putting huge penalties for small incidents. At the same time, overzealous clauses or unreasonable demands by the vendors should be denied frankly and sternly. Termination of contract needs to be considered in case the rules are not followed by the vendors.

3- Building relationship

Relationship between the business management team and the vendor team should be based on trust, faith and respect.

4- Communication

Communication with vendors has to be purely professional and confidential. Vendors should be allowed to place their suggestions in front of top bosses in a well managed forum. The vendor’s suggestion is the most valuable piece of advice, as regards consumer satisfaction. In case a product is not achieving good sales, suggestion from vendors can be used to rectify the mistakes. A good suggestion should be awarded and the vendor should be given due recognition by the top management. Every month top 10 vendors with good suggestions should be selected and given awards. This will encourage healthy competition. Brainstorming sessions should be encouraged to find out new sales strategies.

5- Performance monitoring

A close watch needs to be kept on the performance of vendors.2

6-Satisfy the vendors’ needs

This is vital to maintain zealous working of vendors’ team. The contract signed should ensure good profit margin to the company as well as the vendors. The company and vendors can help each other by advertising in television media or via brochures, by sharing the costs.

7- Open dialogues

On monthly basis, vendors should be encouraged to have open discussions with vendors selling similar products. This will promote exchange of ideas, sharing of needs of consumers, different approaches and strategies to maximise sales.

Contributed by Dr. Rachita Narsaria


1-Indian Institute Of Materials Management


2-Money watch