As your business operations grow it’s hard to manage everything yourself. That is especially true if you run a B2B business. Keeping track of a large inventory is time-consuming and increases lead times when inventory is mismanaged. That is why more businesses are focusing on vendor relationships than ever before.
Tech Pro Research survey found that 57% of companies’ IT departments have to spend more time maintaining vendor relationships than ever before. That might only take up 10% of their time but when almost half the companies surveyed have 10 or more vendors, you can see how tedious this gets in inventory management.
So how do effective vendor relationships directly contribute to successful inventory management? Here, I will share some vendor relationship strategies for B2B inventory success for your business to prosper.
What Is A Vendor? – Vendor and Supplier Differences
Before we get to the strategies, we should discuss what a vendor is. Most people will confuse vendors with suppliers because it seems they are doing the same job.
A supplier directly produces and sells the products to other businesses. This makes them the first part of a supply chain because of their direct relationship with other businesses. For example, Taiwan Semiconductor Manufacturing Company (TSMC) is a supplier of semiconductor chips. They manufacture and supply to multiple companies like Samsung, Apple, and other tech giants in the industry.
On the other hand, vendors are the complete opposite. They buy and later resell the products to both businesses (B2B) and customers (B2C). For instance, a vendor can buy the semiconductor chips from TSMC and then resell them to other companies. So if suppliers are the first in the supply chain, a vendor would be the final link.
Here is a table for you to look at to make it easier for you to see the differences between suppliers and vendors so we don’t confuse the two going further:
Suppliers | Vendors | |
Production | Raw material for businesses | Resells for inventory purposes |
Business Relationship | Strictly B2B | Both B2B and B2C |
Supply Chain Link | First | Last |
| Relationship Focus | Quality of product | Competitive pricing |
| Order Sizes | Usually large orders | Small to large |
5 VRM Challenges With B2B Inventory
Vendor relationship management, or VRM, is the practice that a vendor and a business take to strengthen relationships. VRM can include practices such as risk assessment, learning about each other’s businesses, cost negotiations, and many more. VRM is usually done via software or tools to understand how a business and its vendor can be better for each other.
There are many challenges to maintaining vendor relationships and good VRM practices. USC Consulting Group states that 47% of interactions between vendors and businesses come to a stop at a certain point. So let’s look at the challenges that you might face in vendor relationships for your business:
- Communication Issues
- Vendor Performance Expectations
- Supply Chain Issues
- Scalability Issues For Vendors
- Possible Data Breaches
Challenge #1 Communication Issues
Communication issues are one of the biggest challenges in vendor relationships. Vendors might take too long to reply to your queries about inventory. Communication issues become even more complicated when you are dealing with vendors from different countries. Language barriers, cultural gaps, and timezone differences only add to the communication issues.
Challenge #2 Vendor Performance Expectations
Another challenge between vendors and businesses is a vendor’s ability to provide products for businesses. If the vendor cannot reliably supply your business with the products you need, then you lose customers. Backorders increase and that increases pressure on the vendors. This increases issues with communication and becomes a problem that does not go away.
Challenge #3 Supply Chain Issues
When dealing with a vendor, there are obvious supply chain issues that they might run into. The worst supply chain issues are ones you are unable to do anything about.
For example, your vendor runs into supply chain issues due to a natural disaster. It limits how much product you can obtain in that particular time. Additionally, recovering from such a situation can take a long time. All the while your backorders are increasing and your clients are becoming frustrated with you. One such risk coming true is a major setback for your business.
Challenge #4 Inability To Grow Your Business With Current Vendors
Every business aims to grow and boost sales over time. But achieving this requires vendors that match your business goals and can scale accordingly. If your current vendor can’t adapt to these changes, your business growth is slowed.
This means that you need to find new vendors. However, it also causes disruptions in your business operations especially for your inventory. Building relationships with new vendors takes time which is the main challenge here. Constantly switching vendors will cause disruptions in the growth of your business.
Challenge #5 Possible Data Breaches
One huge issue with vendors is privacy breaches. CSO reports that 71% of companies expect privacy breaches due to vendor access to their network. This is a huge challenge because the same CSO report states that only one-third of companies are confident in their vendor’s network security.
This puts not only your business but also your B2B clients at risk. One privacy breach leads to a loss of confidence in your business and for vendors as well. It is a lose-lose situation that could lead to huge losses of business and any potential new business.
10 Vendor Relationship Strategies For B2B Inventory Success
So how do you deal with all these challenges and other challenges with vendor relationships? The short answer is to be on the same page with your vendors. That means collaborating with your vendors and coming up with business strategies together. Here are 10 vendor relationship strategies for B2B inventory success that you can apply to do this:
- Cost Transparency With Vendors
- Multiple Communication Channels
- Measure Vendor Performance Metrics With KPIs
- Creating A Business Continuity Plan Together
- Exchanging Feedback And Reviews With Vendors
- Vendor-Managed Inventory
- Protecting From Data Breaches
- Making Timely Payments
- Conduct Training With Vendors
- Using Third-Party Applications
Strategy #1 Cost Transparency With Vendors
Proper cost transparency is what leads to reduced costs for your products and better vendor relationships. A McKinsey study saw companies that used proper cost estimation using a tool called Cleansheet. With facts and stats to back the cost negotiations, the study saw an 18% drop in price when buying from suppliers and vendors.
This is because vendors overestimate overhead costs which increases prices. This cost assessment and transparency can be achieved when both you and your vendors work together. A collaborative effort to see where prices can be reduced and when efficiency can be increased will improve your relationship with your vendors. Additionally, it will also ease inventory
Strategy #2 Multiple Communication Channels
It is important to have proper communication with your vendors. But communication on a single channel can be problematic as your vendors might not respond in time. That is why you should open multiple channels of communication with them. It could be live-chat service, email, ticket system, phone calls, and other direct line of communication.
These multiple channels allow you to always communicate with your vendors and reduce chances of miscommunication. The better and easier the communication is with your vendors, the greater the relationship you can create with them. Not only that, but it will also bring inventory success as well. As you reduce miscommunication with your vendor, you can manage the right amount of inventory.
Strategy #3 Measure Vendor Performance Metrics With KPIs
Performance metrics are your way of analyzing how well something is doing. Your vendor’s performance metrics must match the key performance indicators (KPIs). KPIs help you understand where you and vendors can improve.
Whether it is financial KPIs or production KPIs, they have to align with your business goals. For example, set a delivery time and keep track of the percentage of deliveries that have been on time. Setting these goals with your vendors will help them know how successful they are with your orders. It lets them know where they are doing good and where they can improve. With improvement, your relationship with them becomes better and aligns with how you want to grow your business with them.
Strategy #4 Creating A Business Continuity Plan Together
The BCI Supply Chain Resilience Report from 2024 suggests that less than 60% of suppliers and vendors have business continuity plans in place but only about 33% of B2B companies take this into account. A business continuity (BC) plan is where vendors have a plan to continue supplying products even with supply chain disruptions.
Your business must verify that your vendors have a BC risk management plan. If they do not have one, help them create one. Get together with your vendors and develop a strategy for a BC plan that best suits your business and your vendor’s business.
This could be disruptions in delivery and inability to find supplies among other problems. It might seem like a small, unnecessary strategy but you never know when unexpected disruptions might arise. Coming up with a plan together will bring your businesses closer and strengthen vendor relationships and inventory success for years to come.
In the BC plans, you can also bring up scalability issues. If they know how much you want to grow over the years, your vendors can scale with your business. It is a win-win situation for both parties and you can grow your businesses together and create a healthy relationship.
Strategy #5 Exchanging Feedback And Reviews With Vendors
Often the radio silence between your business and vendors harms your relationship. That is why it is important to be honest with each other and regularly exchange feedback with your vendors. Getting or giving feedback to your vendors provides an opportunity to improve your relationship.
A simple feedback survey that you share with your vendors can go a long way. In the feedback, you gain insight into their business and they can understand yours as well. The feedback can include satisfaction levels with supplies, communication efficiencies, and inventory management.
You can also ask for feedback and reviews from your vendors about doing business with you. Here, you can truly understand where the vendor relationship is going and if both parties are satisfied with each other. This strategy ties in with the multiple communication channels and will help you realize how you can improve inventory success.
Strategy #6 Vendor-Managed Inventory
If managing your inventory becomes challenging, you can allow your vendors to manage your inventory for you. They can do this with an inventory management system giving them visibility of your inventory. With the right inventory management software, they can track and replenish your inventory when needed.
This eliminates the burden of inventory management for your business. You can focus your business elsewhere while your vendor manages your inventory. In the long run, this helps build a positive vendor relationship and you can focus more on growing your business.
Strategy #7 Protecting From Data Breaches
Cybercrime has been on the rise since the start of the pandemic in early 2020. It was reported that cybercrime would cost $8 billion in 2024 across consumers and businesses. One of the major targets in cybercrime is attacking vendors who have access to businesses. Sadly, there are less than half of businesses that check for cybersecurity risks.
Cybercrime will only rise in the future. That is why businesses and vendors need to act together to assess cybersecurity vulnerabilities. Here, you can create a cybersecurity checklist to prevent data breaches from occurring within your business. This includes auditing security credentials, monitoring assets that vendors have access to, and keeping a check on vendor inventory.
Preventing data breaches will allow you to keep your and your vendor’s inventory protected. It will help create deeper vendor relationships.
Strategy #8 Making Timely Payments
To ensure business operations run smoothly, you should always make timely payments to your vendors. In Q1 2021, U.S.-based businesses took almost two months before they finalized payments to suppliers and vendors. Granted, this report was when businesses were struggling during the pandemic. But this sours vendor relationships.
However the payment is defined, make sure to always pay your vendors on time. This will allow them to always have products in stock for you. Not only that, but it increases the likelihood that the vendors will continue doing business with you.
In addition, timely payments also bring in a loyalty factor to your vendor relationship. This means that your vendor will give you better rates and better-quality products. It helps create a situation where your overall profitability increases just because you keep your vendors happy. Give your vendors incentives for always being on time with delivery or reward them in some other ways to deepen the relationship for inventory success.
Strategy #9 Conduct Training With Vendors
You want your business to get a steady shipment of products from vendors. Nothing brings businesses and vendors closer together than working to make sure vendor operations are more streamlined.
One way you can achieve this is to train your employees together with your vendors. In these training sessions, you can outline and help remind your vendors of how you run your business. You can discuss strategies for both your businesses and talk about risk management like security risks and contingency plans. It reduces the disconnect with them and increases efficiency once they see how you work.
Training sessions once a year could be key to helping streamline your vendor’s orders. They will appreciate seeing how their products are being handled and they will get to know more about your operations. The yearly training session can bring in new ideas as well and help both your businesses.
Strategy #10 Using Third-Party Applications
In today’s business environment, using third-party applications can improve vendor relationships. Inventory management and vendor relationships can become more streamlined and increase efficiency with the right third-party applications used.
Let’s take an example where your business buys products of different variants in bulk from vendors. You can search for vendors that use a variant builder app on their store. Let’s take this store as a vendor example:
If you’re seeking a variant builder app at Shopify to save your time, you can see that the vendor is using it. Here, you can pick and choose 10 quantities of the different variants. Once that is done, it is all added to the cart in one click.
It also shows how much your vendor has remaining. Having this information shown to you as you are ordering deepens vendor relationships because it creates chances for communication. If the variant you are looking for is out of stock, you can communicate with the vendor about it. Third-party applications like this on your vendor’s store can help make purchasing in bulk easy and convenient.
These apps are not just for vendors either. If you are a B2B business looking to sell multiple variants or your business deals in selling products in bulk, you can use it as well. It makes selling your products in online stores much easier. With the right one, you can expect your customers to have a better shopping experience. The better their interaction with your store, the more likely they will complete their purchases. That is why the right third-party app will make your Shopify store successful.
Bottom Line
Ultimately, your vendors are a key part of your business. They are responsible for supplying inventory to your business that you used to sell to others. These vendor relationship strategies for B2B Inventory success will help your business in the long run and solidify your business.
