What Is Vendor Relationship Management?

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A business vendor, also called a supplier, is any company that sells items to another business in a business to business transaction, also known as B2B. If a company has to buy items from vendors, whether it is raw materials or office supplies, it has a vendor relationship to manage. A productive relationship allows the company to receive exactly what it needs, when needed and at a price that fits right into the company budget.

Vendor Relationships

The strength of a vendor relationship varies depending on a number of factors. For one the economic climate can drive prices up and prompt a company to start shopping for new vendors. Nonpayment or the slow payment of invoices can also shake up the vendor relationship. In many cases a company’s long term success rides on its relationships with vendors. Communication is key. As Bonnie B. Hendrix, a laboratory manager familiar with maintaining vendor relationships explains, "Open, sincere communication is vital to developing a strong vendor-customer bond."

Managing these Relationships

Vendor relationship management, or VRM, involves the constant monitoring of these issues that can affect the customer-vendor relationship. One of the main goals is to foster a productive process of dealing with vendor companies. A manager, sometimes the purchasing manager, acts as a liasion for the company to communicate with vendors and ensure that the relationship remains strong. Vendor relationship management also involves keeping accurate records on transactions. The increase in the use of electronic ordering systems between the buying and vending company raises a variety of data management issues as well.

CRM vs. VRM

Vendor relationship management or VRM is the opposite of CRM or customer relationship management. While VRM allows a company to manage its purchasing process with vendors, CRM deals with the management of companies on the vendor side of the coin. Customer relationship management involves optimizing the process of selling to companies and also maintaining a fruitful relationship with the customer long term.

On Resolving Issues

When issues arise between a company and vendor, they must be addressed immediately. A slow down or halt of shipments to the company could irreparably damage operations, especially in the case of manufacturing firms. Some companies feel as if they are at the mercy of vendors, which is a signal that a productive vender relationship management policy does not exist. Another goal of VRM is to give the company a sense of freedom from the terms of specific vendors — the company always has a backup plan in case of a problem.

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