Procurement: Prioritise the process.

Established businesses are usually well versed in the need to source competitive supply arrangements and the importance of vetting and managing vendors and their delivery. Their procurement teams work to well-defined and consistent methods and targets which offer vendors the ability to compete for business in a fair and open process, and to deliver their services/products in a way which is agreed and documented. 

On the other hand, smaller businesses tend to default to the mindset of “we don’t have the time, budget or manpower for a procurement team or process”. This results in vendors being onboarded without sufficient due diligence and without the parties negotiating much beyond the pricing provisions of the agreement. It is almost guaranteed that little time (if any) will be dedicated to the broader market research required to establish whether that vendor is the right fit for the business. 

Working with several start-ups, we are trying to change that mindset. Obviously, a procurement team comes with a large price tag but a lot of basic of procurement processes, which require very little money or manpower, are easy to implement and can have a positive impact on your business and the success of your partnerships. Below are some suggestions on how to improve your vendor engagement process.

Market Research & Competitor Engagement.

Even if you are sure of the vendor you want to work with, spend a couple of hours researching their competitors. No harm will come from talking to other companies about alternative solutions, and the availability of other providers can often provide leverage when it comes to vendor negotiation. 

Invest in Standard Terms & Conditions.

Invest in producing your own standard Terms & Conditions on which customers and suppliers are required to contract. Engaging on standard terms enables you to consistently manage your third-party relationships and risk. It also helps to streamline the engagement process, saving you time and money in the long run.

Identify and define your requirements.

Communicate clearly with your vendors so that they understand: what products and/or services are required; what the business and technical requirements are for those products and/or services; what timeframes need to be worked to; and any relevant service level expectations (making sure that this all makes in into the final agreement).

Request a vendor proposal.

Ask your vendor to walk you through their proposal, in response to your defined requirements (see above), to ensure that both parties are on the same page.

Request early sign-off on your Standard Terms & Conditions.

Put your standard Terms & Conditions forward to potential vendors early on and explain that these are the terms on which they will need to contract with you. Early discussions around the required terms ensure that the parties have time to identify and address any issues. Also, outright refusals to agree to your terms can help you to eliminate problematic vendors.

Ensure financial viability & delivery.

Investigate your vendors’ backgrounds, brands, and reputations as service providers and employers. Try to look for testimonials and reviews from former and current clients and employees and check their social media as well as their website profiles. You could also consider conducting credit rating searches as well as insolvency/winding up/litigation searches. These can all help you to identify the right vendors to work with.

Create a scoring system.

Consider what is important for your business as well as the products/goods being sourced and use that information to rate potential vendors on their ability to deliver. This is a good way to identify the strengths and weaknesses of each vendor and to find the best overall fit for your business. 

Top Tip: Engage a legal professional with the right commercial experience to help improve and streamline your vendor engagements and protect the interests of your business.

Disclaimer: Re-think Legal is a boutique legal consultancy providing businesses with legal support, not legal advice. The information contained in this blog is simplified and must not be taken as a definitive statement of either the law or practice of any given jurisdiction and does not constitute legal advice.