Vendor Relations

An important objective in purchasing management is that of maintaining good relations with vendors. A good vendor is an asset to the company; and, therefore just as customer goodwill is considered important, a good relationship with the vendor should also be treated like wise. A vendor who supplies the proper quality materials in proper amounts in proper time is not very easy to find. Moreover, there are many situations where materials are required in a hurry. There are situations where materials are in shortage in the supply market. In all such situations, good relationships with the vendors pay dividends. This may entail: personal relationship, professional relationship:

1. By helping the vendor in times of stress and strain with financial aid, technical aid, technical aid, by providing management skills if necessary, and
2. Maintaining a healthy professional relationship by fair negotiations, fair evaluations and fair compensation.

The modern management theory and world class manufacturing call for a long term, almost a lifetime, association with the vendors. This also means that there will be fewer vendors but they will be dedicated vendors almost as a part of the organizational family.

Until recent past, the Indian industry has not given much attention and importance to vendor relations. But now with Globalization and liberalization policies of India government vendors are given due importance and are treated almost as business partners. The emphasis if any has been on vendor selection and on monitoring the performance of the vendors through a vendor rating system. Vendor is an entity that is, generally taken for granted. The attitude is: All said and done the vendors for the company may change over a period over a period of time. They may change to another business; some of them may not give the desired performance in quality, delivery and price and therefore, one should always expect a drop out rate in the vendors list of the company.

In any case, a continuous program of developing vendors ands of selecting new vendors, if and where necessary, should be in existence in any organization. When selecting new vendors what should a buyer look for?

Selection of Vendors:

The production capabilities of the vendor:

1. Capacity to manufacture the required product in desired quantities
2. Possibility of future expansion in capacity
3. The understanding or the knowledge of the vendor regarding the buying company and its needs.

The financial soundness of the company:

1. The vendor company’s capital structure
2. Whether it belongs to a target group of companies; whether it is a Private Limited or a Public limited company.
3. The profitability record of the company in the past.
4. Expansion plans of the company in the future.

Technical capabilities (these are mostly regarding capabilities):

1. Whether the available machines are capable of the required quality of materials? What are the future plans of the vendor?
2. Whether there are enough technical skills (skilled manpower) available with the vendor?
3. Whether there is proper research, design and development facility available with the vendor?
4. What is the record of the vendor in fulfilling the orders of other buying companies in the same business?
5. What has been the consistency in the quality produced by the vendor?
6. Whether the vendor has appropriate storage and warehouse facilities to retain the quality of the produced product?
7. Whether proper quality control procedures are being followed in the vendor company?

Other considerations:

1. What are the working conditions in the vendor company?
2. How are the industrial relations in the vendor company?
3. Whether there is any possibility of disruption of the supply of materials in terms of quantity and/or quality due to human relations problems in the vendor company?

While getting this information the Purchasing Executive should take the help of his colleagues in production, engineering quality control industrial relations, finance and other functional areas so as to get a proper evaluation of the potential supplier.


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