Expert Reveals the 3 Key Strategies of Vendor Management

May 21, 2015 Amanda Salem

Want to be happier at the office? Planning, managing and tracking your purchasing can help make your employees, boss, vendor and you happier–and it’s not hard to do.

We sat down with Soheila Lunney, President of Lunney Advisory Group, to talk about purchasing for the office. Lunney’s firm provides purchasing coaching, mentoring and training services, and she works with organizations of all sizes in all industries.

Q: You’ve written a book called The Procurement Game Plan. In it, you suggest office buyers plan, manage and track their purchasing. How do they begin?

A: Start by setting some objectives. First and foremost, you want to satisfy employees, your internal customers. Look at ways to improve internal processes such as generating purchase orders and invoicing. These can be automated and vendors can help. You should also think about total cost rather than price, and document savings.

Q: What’s next?

A: I’m a big believer in not reinventing the wheel. Make a list of the items your internal customers will need in the coming year. Look at your purchasing history and talk to end users about items they may need for new projects. Get on the phone and speak with office buyers at other organizations to learn what they’re doing. Ask vendors about new products and services.

Q: You suggest that office buyers look outside their organizations to gather information that will help them with their purchasing. Are there other sources they should consult?

A: With the information you gathered internally, prepare a Request for Proposal or RFP. It doesn’t have to be fancy. Create a market basket of items that you plan to buy so the vendor can price it out. Send the RFP to two or three vendors, including the incumbent. You’re not pointing fingers, but you also don’t want the vendor to become complacent. By including them, you’re saying that you’re always looking for ways to improve and that it doesn’t necessarily have to be about price. With the responses to the RFP, you should have enough information to select a vendor.

Q: Earlier you talked about total cost and now you’re mentioning ways to improve without lowering prices. What are some ways office buyers can manage purchasing costs?

A: They can bundle their purchases. Let me explain. First, there’s horizontal bundling. That’s when buyers combine purchases with other buyers in the organization. With a bigger bundle, your organization should be able to negotiate a lower price, bigger discount or rebate. Then, there’s vertical bundling. That’s when buyers consider other related goods and services the vendor offers such as breakroom supplies or printing services, and combines one or two with what they’re currently purchasing. Again a bigger bundle should help in the negotiation process.

Q: Do you have other suggestions for helping buyers to better manage costs?

A: Explore the possibility of your vendor extending your organization’s pricing to your employees so they can use the discount when they purchase their own personal office supplies. Employees will love it. It becomes an employee benefit. Combining these buys will also help increase volume, which again means more power to negotiate.

Q: So, how do office buyers know the vendor is doing a good job?

A: Again, don’t create more work for yourself. Vendors track their performance for their own internal purposes. They look at such things as on-time delivery and purchases with minority and women-owned businesses. Ask them to run a report for you. Then, invite them to attend a business review meeting twice a year to discuss. If office buyers put the things I’ve talked about in place, their relationship with their vendor is going to be more meaningful and they are going to be more successful at what they’re doing. Everyone–employees, the boss, the vendor and the buyer will be happier.

Interested in more on how to optimize your vendor relationships? Download our free issue of Business Insights for tips on how to determine whether you’re really getting what you need from your supplier relationship.

 

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