Vendor management best practices
As your business continues to evolve, the number of services you need to track and compliance regulations you need to follow can make vendor management a difficult job. These best practices can help you streamline vendor management.
At Thimble, we understand the nuances of running a small business. We know that, as an organization scales upward, its list of individual vendors and contractors will grow as well.
And as you continue to evolve, the number of services you need to track and compliance regulations you need to follow make vendor management a difficult job.
That’s why we’re here to help. This guide will break down some of the most essential practices to help you stay on top of managing vendors. From the initial contract negotiations through every stage of your relationship, a level-headed strategy is your best bet to getting the most out of your vendors.
Let’s go over what that strategy should comprise.
What are the best practices for vendor management?
To avoid the many pitfalls of vendor management, it’s essential to strategize diligently. There’s no perfectly foolproof plan, but establishing vendor management best practices is a great way to make the execution as seamless as possible.
The practices for vendor management break down into three main categories:
- Knowing your business and that of your vendors
- Collaborating and sharing
- Simplifying certification
Know your needs, vet your vendors
Knowledge is power.
When it comes to an effective vendor management process, it’s essential to perform a continuous assessment. You need to analyze both your business’s own needs and the various ways in which your vendors can—or can’t—meet them.
That means not just establishing priorities but collecting all relevant data on budget constraints and allowances. Once you know exactly what you need a vendor for, what particular items you need them to produce, and what you can (and can’t) afford, you can begin searching for the right match.
The process of vendor selection entails:
- Taking bids and hearing offers from as many potential vendors as possible
- Casting a wide net helps ensure you’re not missing a great match
- Competition ensures both optimal quality and cost-efficiency
- Surveying the field of candidates and create a short list of best matches
- Interviewing each third party vendor to understand their fit:
- With your goals and budget, established ahead of time
- With your workforce and corporate culture
- Negotiating a contract that benefits both the vendor and your company
This last step is essential to successfully managing vendors, as it ties into the next practice. While you’re always prioritizing your own company’s interests, it’s in your best interest to form truly symbiotic, mutually beneficial partnerships with multiple vendors.
Share, communicate, and collaborate
When strategizing your vendor management process, it’s important to prioritize long-term sustainability and partnership rather than short-term savings. Building a partnership that can last is the key to successful growth—both for you and your vendor.
Your relationship with your vendor needs to entail constant communication. To that end, transparency and collaboration are key elements to a successful partnership. While boundaries are important, you should seek to build mutual trust with your vendors to help with overall vendor relationship management. Building strong vendor relations involves vulnerability and humility in negotiation.
From the very first stages throughout the life of your relationship, consider:
- Meeting them where they are – Rather than approaching your relationship from a one-sided perspective, you should seek to understand your vendors on their terms. Learn about their business models and what they are looking for in potential partners. Seek out ways to help them, too.
- Helping them help you – Likewise, you should empower your vendors to learn about your business. Share with them any non-classified information that can help them understand your situation and how they can benefit you.
- Including them – A vendor can be more than just a supplier of goods and services. In fact, a strong vendor relationship should entail soliciting the vendor’s advice and input on key strategic decisions related to the goods and services they provide. Allowing them to help you strategize is a win-win.
Keeping up with these practices and treating your individual vendors as close associates rather than competitors is the best way to grow together. And that partnership means more than just synergies and savings down the line.
It means having allies.
Finally, a big part of looking out for your vendors is diligence in insurance.
Simplify insurance and certificates
When you work with a vendor or contractor, there are matters of insurance you need to have in place to protect both you and the vendor from financial harm. The procurement of a vendor contract along with insurance is the best way to protect from third party risk.
In the case of an accident, a dispute over professional obligations, or a criminal occurrence, hefty medical and legal fees pose risks to all stakeholders. Practicing caution will minimize the change of any of these things happening, but you can’t safeguard yourself from 100% of risks.
That’s why you need insurance.
But insurance is also one of the most challenging aspects of vendor management.
Businesses managing a small army of multiple vendors, suppliers, and contractors know that managing insurance documentation and compliance can be extremely difficult. Obtaining and updating Certificates of Insurance (COI) for each party is one of the biggest challenges.
But it doesn’t need to be.
Our Thimble Certificate Manager streamlines the process, empowering you to keep track of all COIs and manage them in one simple suite. Approve COIs in one click and protect your interests as an Additional Insured.
Manage your vendors with ease
By following the practices outlined above, your business is well prepared to manage its list of vendors. No matter how big your list is now, and how big it will become, it’s essential to continue:
- Assessing your needs and means
- Working toward collaborative partnerships
- Keeping track of insurance, including certification
With our COI management suite and policies custom-tailored to your needs, Thimble offers game-changing solutions to the biggest problems in insurance. No more email chains, no more confusion: getting started is as simple as clicking on “Get a Quote” or downloading the Thimble app and answering three quick questions.
All that can be done in as little as 60 seconds.
With Thimble, see how easy insurance—and vendor management—can be.
Our editorial content is intended for informational purposes only and is not written by a licensed insurance agent. Terms and conditions for rate and coverage may vary by class of business and state.