Before even deciding to hire vendors it’s important to level-set on why you want to hire them. This starts by defining your business goals for vendor partnerships. Do you want to cut costs? Improve quality? Drive faster innovation? Also, what is your risk tolerance with outsourcing? Are you ok to accept that lower costs may mean a slight consolation in quality?

All of these questions are super important to consider when deciding which vendors might be right for your business. By establishing a clear selection criteria based on goals and risk tolerance, you can create a framework that ensures reliable, cost-effective, and impactful vendor partnerships.

Once you have a strategy in place, it’s important to create a process for vendor selection. This may include evaluation criteria for technical capabilities, past performance metrics, and pricing. You can employ a scoring method to objectively assess potential vendors on the criteria you are looking for — which creates a standardized, fair, and repeatable process for choosing the best partnerships.

Work with your legal team, or legal counsel, to draft contracts that clearly define the expectations of both parties. This might include expected performance metrics, payment terms and conditions, dispute resolution protocols, termination clauses, and risk mitigation strategies.

The goal is for both parties to feel comfortable with the agreement they are entering into. It also means you start off on the right foot as partners, and can expect the delivery of the service and product that meets or exceeds your expectations. A good contract protects your interests, sets clear expectations for deliverables, and creates a solid foundation for your partnership to grow from.

Depending on the industry you’re in, you will need to ensure that your vendors meet the industry regulations and legal requirements expected of them. This is important to integrate into your contracts, so you can ensure that you’re protected from any issues that may arise, and ensure that your vendors adhere to the necessary standards in place. Plus, make sure to regularly review and evaluate your vendors to verify compliance with their contractual obligations and industry regulations.

Develop a smooth onboarding process to integrate new vendors into your existing workflows effectively. This would include finalizing contracts, setting performance KPIs and expectations, granting access to systems and training materials, and setting your vendor up with any tools you expect to collaborate with.

A well structured onboarding process ensures that vendors can hit the ground running and are well-prepared to meet your expectations from the outset. It also ensures you can properly manage and monitor their work within the established frameworks you’re used to working in.

With your onboarding finished, you should have identified and set Key Performance Indicators (KPIs) that directly measure a vendor’s performance against your business goals. These KPIs should be monitored and regularly tracked over time to assess progress and identify areas for improvement, ensuring continuous alignment with your business objectives.

Examples of relevant KPIs will vary depending on the industry you’re in, but in general may relate to on-time delivery, customer satisfaction scores, conversion rates, and defect rates.

As your vendor’s work progresses, it’s important to maintain open and consistent communication to build trust and promptly address any issues. This may include setting up regular check-ins over email, phone, or video; or by establishing dedicated Slack channels between teams to keep up to date on projects in real time. The goal is to foster a collaborative environment where both parties can work together, discuss performance, address issues, and explore opportunities for improvement — ensuring a partnership.

While monitoring progress, it’s important to also run thorough due diligence to identify vendor management risk. This might include financial instability, cybersecurity threats, or supply chain issues. Keeping ahead of any potential issues a vendor might face helps you as a business minimize the impact of potential issues. For example, being associated with a partner who has a data leak. By anticipating this as a potential issue, you can ensure your customers are not impacted, and your reputation as a company is not tangentially hurt by associating.

You can proactively manage these types of risks by securing contractual clauses addressing data security protocols, diversifying your vendor base to avoid dependence on a single supplier, setting up a vendor management policy, and maintaining backup suppliers chains for critical deliverables.

You can use vendor management software to simplify everything from vendor onboarding to contract management to accounting automation and performance monitoring. Leveraging technology enhances efficiency, accuracy, and transparency in managing vendor relationships, which leads to better overall impact to the work being done.

Behind the transactional relationships you have with vendors are the longer term strategic partnerships. These are built on the trust you develop through collaboration, and can help lead to new products, services, or solutions that improve upon your existing offerings. This may include joint initiatives that leverage combined resources for more effective products and services.

Encourage your company to value the continuous improvement of vendor management practices. If something feels broken, encourage employees to find ways of making it better. The reality is that individual contributors are often the ones working closely with the vendors themselves, and so will provide valuable feedback as to how the relationships are working. Allow your team to identify opportunities for streamlining processes, optimizing communication, and enhancing collaboration. By fostering a culture of continuous improvement, you can ensure that your vendor management program remains dynamic and effective.

Keep your vendor management program effective and relevant by conducting periodic audits of your processes. Regularly review your vendor management strategy and identify areas for improvement based on performance data, feedback, and changes to your business. Are you still getting the value from your vendors that you expect? Are they delivering on the contract you originally negotiated?

All of these considerations are important to check on over time, so that you can optimize your vendor relationships and address any potential issues before they spiral into a bigger issue.

Vendor management is the cornerstone of successful business relationships. The best partnerships thrive on collaboration, trust, and a shared vision of creating exceptional value for customers. By implementing the best practices outlined above, you're not just setting up your vendors for success – you're laying the foundation for your own business growth and efficiency.

However, managing vendors effectively requires more than just good intentions. It demands robust tools and systems to support your efforts. This is where Brex comes in. Our platform offers a comprehensive solution for vendor management, from centralizing vendor information to automating bill payments and implementing spend controls.

With Brex, you can track and categorize vendor spend in real-time, generate detailed reports for better decision-making, and integrate seamlessly with your existing accounting software. These features not only save time but also provide invaluable insights into your spending patterns, helping you identify cost-saving opportunities and negotiate better terms with suppliers. Plus, our corporate credit cards offer a flexible way to manage vendor payments while earning rewards on your business spending.

Think of Brex as your partner in vendor management – like a perfectly fitted pair of sunglasses that enhances your performance, protects your interests, and yes, makes your business look good. While our sunglasses analogy might be a touch cheesy, the impact of solid vendor management supported by the right tools is crystal clear.

Ready to elevate your vendor management? Sign up for Brex today and discover how our solutions, including our corporate credit cards, can help you build stronger, more productive vendor partnerships. With Brex, you'll have the tools you need to transform your vendor relationships from mere transactions into strategic alliances that drive your business forward.