Small and big businesses operate in the same environment under the same laws but the practicalities and realities of doing business are very different for them. These differences exist in vendor relationships as well. Big businesses generally deal with big vendors who can provide them supplies, materials, and services across the country. Small businesses usually have vendors that are themselves small businesses. While the small business vendors can match the big vendors when it comes to service quality (sometimes even surpassing them with a personal touch), compliance is one area where big vendors are usually ahead.
Why compliance is different for small businesses
The size of the vendor itself is not what results in difference in third party vendor compliance – the difference stems from the fact that major vendors usually have their own compliance management programs, while small vendors may not. The major vendors operate at such a large volume that investing in a compliance program is not a problem for them. They also often have sophisticated inventory management programs which can be integrated within the client’s systems. This vendor inventory management requires a sophisticated supply chain system, an inventory management system, and a compliance management system.
These systems are usually completely absent in small businesses. You’ll find that most small businesses handle compliance and inventory management manually through spreadsheets. There are no systems to integrate with your organization.
However, the needs of small businesses are the same when it comes to compliance. They need to comply with the same laws and regulations. Thus they must ensure that their vendors can rise to the occasion and deliver them not just the quality but also the levels of compliance that they need.
Creating Productive Vendor Relationships
The form of vendor relationship management present in most companies is a simple feedback loop. If the vendor is non-compliant or fails to deliver the services or materials promised the client can request a chargeback or change vendors. The problem is that in such a relationship there is no existing process for vendor improvement. If small businesses want better third party vendor management, they need to improve the third party vendors around them.
Improving third party vendors may seem to be a major undertaking but all it takes is giving the right feedback at the right time. Instead of waiting until the vendor makes a major mistake, it is easy to give them feedback which improves their performance week by week. This is the main aim of vendor management systems – to cultivate better vendor relationships. These systems have an option to give continuous feedback to vendors. Instead of simply providing feedback when a major problem occurs these systems help provide continuous improvements.
The Best Vendor Relationships are Beneficial for Both Parties
The ideal third party vendor relationship is one where both the vendor and the client improve their businesses by working together. Such approaches are common in many industries. The automobile industry has some of the strongest vendor relationships. Vendors for companies like Toyota operate almost as if they are a part of the company, and the companies encourage it because it results in a very efficient and productive system for all parties involved. Vendors are not just companies that your organization pays for services or materials – vendors are important partners and they needed to be treated as such. If there is a they should be discussed so they can be fixed before they cause too much damage.
The traditional third party vendor relationship often creates an adversarial relationship between vendors and clients. Since the vendor only gets feedback when there is a problem, they can get a bit defensive which can in turn frustrate the client. Vendor management systems rethink the third party vendor relationship and instead create a system which can be used by both the clients and the vendors to collaborate better.
If your organization has struggled with vendors in your local area, try a vendor management system and see what impact it makes. You will find out that even the vendors your organization has written off completely will provide better services once they start receiving continuous feedback through a vendor management system.
About the Company
360factors, Inc. (Austin, TX) helps companies improve business performance by reducing risk and ensuring compliance. Predict360, its flagship software product, vertically integrates regulations and requirements, policies and procedures management, risks and controls, audit management and inspections, and on-line training and qualifications, in a single cloud-based platform based on artificial intelligence.