Why It’s Important To Look At Your Vendors Regularly

Vendor Review
Review vendors’ performance regularly. Image: Vendor performance

Regardless of the business you’re in, vendors play a major role in the success of your business. Implementing a formalized system to evaluate and track vendor performance is essential to the profitability and smooth operation of your business venture.

Although setting up a performance program might seem daunting to a small business owner, the associated benefits are numerous ranging from increased service and efficiency levels to decreased operational cost.

While it’s important you don’t take these service providers for granted, you may forget to examine them periodically due to problems associated with your business.

If you’re contemplating a review of your vendors’ performance, here are some benefits to expect.

Enhance Performance Visibility

When you don’t know the facts about your vendors’ performance, you typically base vendor management on guesses. Furthermore, performance evaluation could enhance performance. The improvement could be more dramatic when you award extra businesses based on vendors meeting performance objectives.

Managing Vendor Risks

This is perhaps the most compelling reason to assess your vendors. Most businesses rely on the constant and smooth flow of supplies, and interruption could result in the emergence of problems.

Vendors face various risks ranging from cash flow problems to lack of materials, all of which threaten the flow of supply. While it’s impossible to eliminate the risks completely, constant performance evaluation of your vendors allows you to take appropriate action to keep them at bay.

The assessment process gives you an opportunity to dialogue with the vendors, so you can identify the possible risks and manage them. If you don’t conduct a review, it’s likely that you’ll only discover the full degree of risks after the occurrence of a major problem.

Unearth and Eliminate Cost Drivers and Hidden Waste

Inefficiencies characterize the supply chain. The improvement of some of the inefficiencies can occur through better communication between vendors and customers.

Other inefficiencies however, arise from poor business practices by the supplier, resulting in quality problems, slow deliveries, and higher costs. You can decrease wasteful activities and costs, typically originating from supplier glitches.

Customers can help eliminate inefficiency and waste out of the business by having a better understanding of vendor performance and business practices.

Improved Coordination

Evaluations help initiate improved coordination between the business and vendor. Consequently, the customer will indicate when additional supplies may be necessary in advance.

Coordination also allows the vendor to fulfill the business’s objectives. Furthermore, the business owner and vendor will align and integrate processes, practices and procedures to enable a mutual working relationship.

Increased Productivity and Efficiency

Your business will experience enhanced productivity and efficiency as you interact with vendors. Moreover, a good performance system allows vendors to take the initiative in performing tasks such as updating their information to verify that everything is current.

This could also enhance invoice accuracy and decrease expenses. You’ll also discover that updating information prevents errors and facilitates business dealings between you and the vendor.

Leverage the Supply Base

Measuring vendor performance allows your business to set a threshold that could result in higher-quality outcomes. Your business can plan new services and products better based on a good understanding of your vendors’ performance levels and capabilities.

Understanding local vendors can help establish whether they can decrease total expenses enough to surpass offshore vendors.

Align Vendor and Client Business Practices

Ideally, vendors should operate their business in alignment with yours; they should share similar business ethics, anticipate similar standards of excellence, demonstrate dedication to continuous improvement, etc.

You’ll realize that a vendor who’s unaccustomed to seeking constant improvement may be incapable of keeping up with your increasing requirements for cheaper, better, faster services and goods.

Final Thoughts

Developing an efficient method of assessing vendors is a vital business competency. Once you implement a reliable performance system, ensure you refine and improve it constantly to obtain the best results from the vendors and system.

Dailey Bookkeeping Services is a Xero Certified Silver Partner and a QuickBooks Online Certified Advisor, so if we can help you with vendor performance, just give us a call, we would love to help you!  The owner, Jacqueline Dailey is a Certified Public Bookkeeper, an Advanced Certified QuickBooks and QuickBooks Online ProAdvisor, a Sleeter Group Certified QuickBooks Consultant and a Xero Certified Silver Partner. We work remotely so we can work with any company located in the U.S. If we can help you with this process or provide you with custom reporting, please give us a call. If we cannot help you, we will refer you to someone who can!  Feel free to visit our website at http://www.daileybookkeeping.com.

Leave a Reply

Your email address will not be published. Required fields are marked *