A key factor in any successful commercial real estate business is the vendors the stakeholders work with. However, many business owners underestimate and underinvest in the management of their suppliers. Simply speaking, vendor management.
In this blog post, we will explore what vendor management is, strategies on how you can improve your vendor management, and the tools you need to implement it in your business – so read on and take notes.
What is Vendor Management?
Vendor management is a company’s internal structure for dealing with external vendors and suppliers. The business’s partnership with vendors is one of key importance and establishing an effective system for dealing with them will lead to a boost in revenue. Vendor management is also a form of risk management- the activities of a key vendor is capable of either a financial downturn or a boost in profits. Regular auditing and check up of vendors can prevent entering into financially unsound vendor relationships.
Benefits of Vendor Management
The benefits of building effective and lasting vendor relationships are invaluable. Vendors or suppliers of your business’s goods and services are some of your most important business partners and as such, a collective effort must be made towards creating an effective vendor management system, capable of maximizing the business and vendors relationship that exists. Vendor management is vital for the economic well-being of your company. An effective vendor management structure must be established in order to streamline activities.
How to Create an Effective Vendor Management Process
A vendor management process must conform with the following vital steps in order to be as effective and thorough as possible.
Assemble the right team
Assign the task of vendor management to a dedicated property management company. They are tasked with employing the right vendors, in line with your financial objectives. This specialized team also manages every transaction or enquires that arise from vendors and suppliers. Vendor contract management and vendor performance reviews also fall within the purview of the property management team.
A property management team serves as your leadership team in all areas of vendor management. They are in charge of managing the vendor relationship and ensuring the partnership is as financially rewarding as possible. The needs and demands of the vendors are channeled through this team of experienced personnel. Expenditure must also be meticulously recorded to allow for a proper auditing and ledger keeping.
Organize suppliers and vendors
Create a database of existing suppliers and vendors, classifying them, based on the nature of their services. This will lead to both time and cost efficiency; vendor performance can be compared between vendors offering the same or similar services. Effective vendor management entails a detailed grouping of vendors, based on criticality, essentiality, and nature of service.
A comprehensive database of vendors and service providers also makes budgeting funds more efficient. You are able to appropriate more funds depending on your business needs at a specific period of time. Vendors of essential commodities are ideally retained as a long-term business partnership, suppliers of goods and services that are not specialized or essential are necessary for short-term gains due to their expendability.
Risk management
Vendor management is also a form of risk management- the activities of a key vendor is capable of either a financial downturn or a boost in profits. Regular auditing and check- up of vendors can prevent entering into financially unsound vendor relationships.
Implementing vendor management strategies
The end result of any business relationship should be mutually beneficial, this is doubly so for vendor relationships. The goal here should be an actualization of both parties goals and objectives; your company gets value while your vendor gets compensation for services rendered. An effective vendor relationship will give your company the competitive edge required in this industry.
Creating an effective vendor management strategy should take the following factors into consideration:
Effective communication
Ambiguity has no merits. There should be a clear line of communication between your property management team and your vendors. The terms of the partnership must be expressly defined, with no room for ambiguity of intentions. Having a dedicated property management team on board, with leaders that understand the nature of such business enterprises are worth their weight in gold; particularly when they know how to effectively communicate with your vendors.
Place a premium on value
It is important to note that employing cheap labor may seem like a sound business strategy, but in the long-run, such an endeavor can result in poor business performance. Hire vendors that give you the highest value for your investments. The choice of vendors can determine the trajectory of your business. Hire vendors with expert knowledge, capable of providing valuable insight on your prospective joint ventures.
Build a long-term relationship
The value of establishing a strong vendor relationship is immeasurable. Building a relationship based on trust and understanding will help you achieve your business goals. Developing a long-term partnership also eases the business process. Building a lasting vendor relationship should be the goal of an effective vendor management system.
Conclusion
The importance of vendor management cannot be understated. In fact, having vendors is required in order to operate your business and maintain your commercial property. How you manage those vendors is up to you and your leadership team but we hope this blog post has provided some food for thought around what you are currently doing and what changes you might need to implement to improve your vendor management processes.
