Be Best in Class with Your Vendors
Your primary focus when building a brand is ensuring repeated success in your customer expectations. If your customers aren’t happy with your product or service, your company is dead in the water. Customer retention relies heavily on consistent quality, service, and on-time deliveries. Vendor management is key to achieving your sales objectives and financial success.
No matter the current phase of your company (start-up, emerging or established), vendor relationships are as critical to the growth of your brand as you expand your customer base. Your vendors are essential to your success; remember to treat them with respect. It is inevitable in any business to avoid product delays due to unforeseen situations. Having a healthy vendor relationship can minimize the effects and avoid detrimental results. They are after all your partners in your Brand’s journey. When problems do arise due to quality, delivery, etc., be professional when discussing it with your vendor. It is understood hiccups can be costly to your brand. However, being emotional or critical of your vendor’s performance can damage future relationships with the vendor. The best approach is to reach out to your vendor and let them know about the issue, ask them what may have caused this issue and how can we resolve quickly, and if they can assist in communication with your customers on how best to relay the issue/solution to your customers. Asking them for help to resolve brings them into the process. Remember honey is better than lemons!
Before engaging any vendor, create a detailed engagement and financial plan on your specific needs. If you are an emerging brand, your business is smaller than a typical customer. You most likely have already encountered vendors requiring minimums that far exceed your first-year sales and budget. Eventually, you find a vendor tailored to work with smaller volumes with the hope that your brand will evolve into a medium to large size customer. Engaging vendors with a well thought out plan is not only appreciated by the vendor but will most likely lead to an enhanced partnership. Preparing a plan will help you clarify your needs before engaging a vendor. Here are few topics to help develop this plan:
Brand Story:
How did your brand start?
What year?
Mission of the brand?
This helps set the stage as an entrepreneur/owner. How much you know about your existing business and where you see the brand direction.
Current Business Volume
Average sale units by SKU per month
Anticipated annual volume in unis by SKU
Distribution (D2C, B2B Specialty, B2B Mass)
You do not need to give away specific volumes or sales numbers. Offering this information helps vendors understand what products, tools, or services they can offer to support your current stage and future growth.
Future Business Goals
Any new distribution channels opening in the near future?
Any significant marketing initiatives that will significantly impact the growth of your business?
Again, you do not need to be specific to any new channels. A broad overview and the process stage with either retail partners or marketing partners is sufficient.
Past Pain Points
When working with other vendors, what have been your challenges?
What are your expectations with vendors?
Be brief and to the point. This is not the time air dirty laundry about your experience with another supplier. It’s a small world; be professional and stick to the facts.
Cost of Goods
Understanding your costs is not only for your vendor; but essential for your cash flow as you grow. Give potential vendors a target cost for services. Think about giving a range as opposed to an absolute number.
If you do not have this information in advance, the vendor may assume that you are not a customer with which they would proceed. It’s important -- do your homework!
Vendor Questions
While providing pertinent information about your brand, it’s also a time to interview the vendor to see if they are a good fit for your brand. After viewing their website, here are some specifics to pose to the vendor.
How long have they been in business?
What manufacturing or supplier standards do they adhere to?
What is the ratio of customers to account managers, support team, etc.?
What is their Minimum Order Quantity (MOQ)?
What are product development timelines for new projects?
What are manufacturing timelines once project is approved, and PO is placed?
What are the payment terms? Typically, with new customers, vendors do not offer terms since there is no payment history with the company. If they do not offer any terms, what steps do you need to follow to eventually get terms?
What fees will be incurred during development? Can any costs be rolled into the unit cost of the product? If fees cannot be put into unit cost, when are payments due for these fees?
Remember, you are not the vendor’s only customer. This cannot be emphasized enough. Typical sales and/or account managers oversee at least 250 customers at a given time. Being appreciative and understanding, yet forthcoming, will certainly help your chances of being heard. Being accusatory and demanding only increases your chances of being avoided and/or dropped by a vendor which can be costly and put your brand at risk. Additionally, vendors serve great value as you establish your company’s credit. You may call on them for trade credit references when working with new vendors. So, be sure you are making timely payments and always be in good standings with current vendors.
Building trusted partnerships with your vendor is invaluable. Being a great customer can pay huge dividends to your brand’s success.