Contributed by Charu Gupta, Knowledge Buddy
All retailers, whether big or small, have to manage their vendor base efficiently. Larger the number of brands, bigger is the vendor base. Retailers know that to stay ahead in race they have to obtain right merchandise at right quantity and at right prices and make it available to the customers on time.
Vendor Management is a process that allows the retailers to take advantage of ideas, innovation, best practices and cost benefits which the industry offers. A retailer needs to do excessive amount of detailing and documention of each and every process associated with each vendor. He has to define clear guidelines pertaining to shipments, quality controls, pricing, markdowns, logos and promotions, etc. along with the vendors. Proper Service Level Agreements (SLAs) have to be signed with each vendor to keep a record of written agreement with them .
Vendor relationships should be mutually profitable or else it can strain the business relationships between the two parties. There are generally two types of vendors; smaller ones which give you every possible reason of why they can't supply the required quantity of goods on time, are underfinanced and disorganized and the bigger ones which try to enforce their terms and conditions with respect to the lead times, return policies, Minimum Order Quantities (MOQs), etc.
In both the cases the vendor might tell retailers that they have brands without which you cannot survive but if retailers clearly analyze they would know that the dependence is actually in equal proportions. Large vendors might have built a goodwill in the industry and might enjoy large economies of scale but it is the retailer who has a proven track record that customers flock his store to buy the vendor’s products. So, a vendor would never want to lose a retailer who is giving him good business. Finding a new retailer and replacing it with the existing one would be a tough task for the vendor as he would not have any assurance of the business he might get from him. The cost of acquiring a new retailer is much more than expanding the portfolio with existing retailers.
Thus, a retailer should not succumb to the pressures put by the large vendors, infact, they should put forth the terms and conditions which they need very clearly and openly in front of the vendors. Most of the times, they are ready to accept. In case of approaching small vendors, retailers should do a complete research of what other options (read vendors) are available in the market. The retailer should clearly spell out why he wants to do business with the vendor and at what terms. He should not settle for less and should have his options open to make a shift to another vendor.
Following are few points which can help retailers to build a strong vendor relationship:
Share information: Retailers should provide their vendors timely information to get better services from their vendors. The information might be related to forecasts, design changes, new product development, expansion strategy, etc. Retailers should let the vendors know what are their priorities and what do they expect from them.Partner with the vendors and don't be a boss to them.
