Any business owner will tell you that the success of their business depends greatly on both the vendors and suppliers that they choose. While an inflexible and tough supplier will provider mountains of woe, worry, and stress; a good supplier should be able to bring you a bounty of happy customers and profits. Regardless of the size of your dealership or what type of dealership you have, vendors and suppliers play a large role in the success of your dealership. But it’s just as important to pick a good vendor or supplier rather than picking them haphazardly. It should be done through a thorough and pre-formulated evaluation and rating to ensure that you’re getting the best possible. However, you can’t rely on them to become experts in your business data, systems, people, and processes by themselves. A formalized system set in place to routinely track and evaluate the vendor and suppliers performance is key to ensure a smooth and profitable operation. The vendor should be capable of delivering all that you need when you need it. They should also meet your performance and quality standards to offer your customers and business a smooth operation.
Dealerships that are successful embrace their vendor and suppliers as partners that help them to grow their business. It’s essentially a mutually beneficial partnership. Thus, when creating the partnership you have to keep that in mind as it is sure to impact the quality of service you’ll get in the future as well as the price you are negotiating presently.
One of the most common mistakes that many businesses make is having a combative relationship with their vendors and suppliers. That’s the furthest thing from the right thing to do. Many try to beat up vendors to try and get better terms or better prices, which a shortsighted way to do business.
Instead of being stuck on the price, try to focus instead of the quality of service. A vendor with a low price can also bring a low quality of work. Your goal as a dealer is to understand what value the said vendor is bringing to your dealership.
To do so, you need to have a system set in place that helps you select, evaluate, and then reevaluate the vendors and suppliers that you’re working with.
Below are seven tips and tricks for you to effectively rate your vendors and suppliers. These tips are also great to help you track their performance with the ultimate goal of increasing your dealerships overall productivity.
- Classify Multiple Vendors and Suppliers
If you have a large number of vendors and suppliers, and you need to create a survey to properly evaluate them, then it will be cumbersome to employ the same survey in all scenarios. Instead, it’s better to separate the vendors into levels (i.e. level 1, level 2, level 3, etc.) with each level being the level of criticalness. The classification should be what works best for you and your needs. By divvying them up into two main categories, such as primary and secondary or critical and noncritical, it allows dealers to be able to devote more time for measuring your vendors’ performance.
- Establish Performance Indicators
At the beginning of your vendor relationship, you should determine what characteristics a vendor needs to have, maintain, or demonstrate, for them to continue doing business with your dealership. Formulate a specific performance criterion that helps dealers track and evaluate the vendors and suppliers on a regular basis (i.e. on an annual, quarterly, and/or monthly basis). While doing so, you should keep the following considerations in mind:
- Size of company,
- Quality management systems,
- Financial stability,
- Number of certifications, and
- Complaint history.
For example, a few characteristics that you want/need in a vendor could be the speed at which they respond to requests for quotes, the number of times you receive a quality product/part, and percentage of on-time performances. The criteria you apply will be dictated by your own needs and processes. But the basic consideration that all owners should have is whether the vendor has a quality management system in place. Do they have a system with set procedures that people are expected to follow? Do they have a system for handling problems and/or complaints? Do they provide preventative or corrective actions?
- Devise An Evaluation System
There are some common techniques to rate vendors performance, including software applications, system metrics, surveys, and evaluation forms. Your dealership can craft a survey to your own specific needs. It’s even a great idea to ask your employees to answer the same questions to rate your vendors and suppliers. It’s a good idea to review the number of corrective actions that you had to take with a vendor, the number of products you have to return or scrap because they failed to meet the specifications or the number of customer complaints you received due to bad service. You can even monitor vendors and suppliers by periodically performing an audit. The bottom line is that you need to generate reports and measurements throughout the course of your vendor and dealer relationship.
- Settle Who’s The ‘Boss’
Once the criteria have been set, you then need to decide who at the dealership will be responsible for reviewing all the data that is collected. In some cases, you might want to assign an entire team to this task, while others you just need one person. For instance, to select and evaluate level 1 vendors, you might need the presence of the president, someone from the finance department, and representatives from the IT, engineering, operations, and purchasing departments. With level 2 and level 3 vendors, you might need the procurement or purchasing officer to approve a vendor list and monitor their performance.
- Decide When A Red Flag Is Needed
When monitoring a vendors performance, you’ll have to decide when it’s the best time to praise them as well as when it’s time to issue a red flag. When a vendor does a job well, it’s important to show appreciation. On the other hand, when they don’t perform as well as you need them to, it’s important to consider not dropping them. Often times, it looks better to retain your vendors rather than flipping them very frequently. By offering a warning, you give them time to correct the problem.
- Cut Loose Weak Links
No one needs to or should tolerate services that are continually bad. You’re sure to come across a time or situation where you have to let go of an underperforming vendor. They could be cheap, but won’t make the deadlines, nonresponsive to complaints, or cut corners frequently. Whatever the reason is, it can add up very quickly. Ensure that you give them a warning by raising a red flag before cutting ties completely to offer them the opportunity to redeem themselves.
- Maintain A Good Relationship
Think of and treat your vendors and suppliers as a part of your team. Communicate with them openly and often to receive the best results. Though technology is great, it’s sometimes better to offer a more personal touch of a face to face meeting or phone conversation. Try to avoid vendor conflicts by paying them on time or addressing any late payments honestly. Aim to be transparent and upfront with all of your vendors and suppliers, but ensure that they understand your expectations and needs from the get go. The relationship between a dealer and their supplier is at its heart a business partnership, if both parties are involved and active to make the partnership a success, then it will be a success.
