How to build long-term relationships with your software vendors

Supplier relationship management is an important part of your business operations. By properly aligning with your supplier for the long term, you can realize better cost savings, get better supplier performance, and improve cash flow by improving your supply chain management.

Building a long-term relationship with a supplier doesn’t happen automatically or overnight. Cultivating these relationships requires a time investment, open communication, and a close eye on your operations and financial performance. 

This article will share the benefits of cultivating long-term relationships with suppliers, the downsides of sticking with an old-school transactional approach, and ways to save a damaged supplier relationship if things have begun to slip.

Using some tips and strategies as a guide, you’ll be able to establish more fruitful relationships with suppliers, and ensure you get the best total value out of your supply chain. 

Why you need a long-term relationship with your software supplier

Like any other business arrangement, the outcomes of your software supplier purchases can be much improved when mutual interest and trust exist between two parties. Strategic business relationships are a two-way street and should be built on a foundation of communication and trust.

Building solid long-term supplier relationships result in easier negotiation, better terms, the potential for volume pricing, and more flexibility during the contract period.

The best way to ensure that you can take advantage of these benefits is to begin the process of improving your strategic sourcing and building strong relationships with a handful of highly qualified suppliers with a solid offering.

The risks of a poor relationship with your SaaS provider

The opposite of healthy, long-term vendor relationships are short-term, transactional arrangements. In this type of vendor management, deals are based solely on the best interest of the buyer, and terms are rendered solely in the best interest of the supplier.

The outcomes of this transactional style of procurement are predictable, falling into a few recognizable patterns:

Zero-sum negotiations: With a transactional supplier relationship, both parties come to the table focused only on the best possible outcome for their side. This may mean that any deviation from advantage may bring negotiations to a halt. The result could be settling on a SaaS software supplier who is willing to offer rock-bottom pricing, but fail to provide the customer service support that a better-quality supplier could offer.

Unending evaluation process: Taking a transactional approach to procurement means that you are perpetually negotiating with new suppliers to meet your business needs and secure the best terms. Negotiation and evaluation are time-intensive processes. Either due diligence is inadequately formed, or your procurement team spends all its time scrambling to get questions answered and trying to mitigate risk across an ever-widening pool of distributors.

Higher pricing and less desirable outcomes: In a transactional arrangement, your supplier's commitment is constrained to the value your contract provides. Without advantages provided by strategic sourcing, the per-unit cost may be lower but the total cost of the contract may trend higher over time. This may lead to underperformance in procurement KPIs or even excess spending four mitigating risk incidence.

3 strategies to build a successful long-term relationship

A great business relationship goes beyond a bottom-dollar, transactional approach. They rely on making commitments to high-quality suppliers, treating those suppliers as valuable partners, and maintaining a close watch on the performance of your contracts over time. Here are three strategies for building a great supplier relationship with your suppliers:

1. Consolidate your supplier list

Establishing a short list or a consolidated pool of key suppliers often results in doing more business with those suppliers. This increases the communication between parties and creates more financial incentives to help you reach your contract objectives. Limiting your supplier pool also reduces the amount of due diligence and new vendor evaluation procurement must conduct. To save time and money while mitigating risk automatically.

2. Take a collaborative negotiation approach

Negotiating from the mindset of a mutually beneficial agreement will often improve the overall terms of the completed contract. Negotiating in this manner is a collaborative process. It can surface underlying concerns for competing priorities and allow negotiators on both sides to bring their best options and creativity to the table. Collaborative negotiation may not result in bottom dollar outcomes but often produces better results in the long term.

3. Practice continuous supplier evaluation

Actively evaluating suppliers and managing contracts through their life cycle results in better cooperation and a more communicative approach to the supplier relationship. Conducting benchmarking and valuations gives you access to data that helps inform supplier conversations and negotiate renewals. By having the evidence at hand, you are guaranteed to have better conversations with your suppliers and the ability to negotiate terms intelligently.

Tips for repairing a broken relationship with your software supplier

Building solid, long-term supplier relationship management is not a hands-off process. If the service from a supplier has gone south, don’t make assumptions. Get the facts and work together to find solutions that fix the issue and maintain the relationship.

Establish a communication channel: Good two-way communication is key to resolving any conflict. This is true of buyer-supplier relationships as well. Reach out to your contact and set up a meeting with relevant stakeholders to address issues and work on solutions.

Verify your data: Don’t blindly assume the information is accurate. Take the extra time to dig into the numbers and delivery data. Look for discrepancies and use these to drive a meaningful conversation. If you find issues in your contract or ERP data, address these and rectify them to avoid further issues. 

Acknowledge external issues: Especially in light of global supply chain constraints, the supplier may be doing their best to meet their obligations. If external factors are truly the root of supplier issues, acknowledge these and try to find ways to circumnavigate issues. With some creative thinking, you and your supplier may be able to arrive at an acceptable alternative. 

Work out a resolution: With the above steps and data in hand, collaborate on a plan to bring the contract back into compliance and rebuild the relationship. It’s just as hard for a supplier to replace a solid buyer as it is for organizations to churn a supplier and start back at square one. Where possible, find ways to work with your current supplier. 

How Vendr can help you build and maintain great relationships with SaaS providers

Supplier management software featuring automation and data centralization can help you build and maintain solid supplier relationships. 

Automation heads off many of the communication and information exchange challenges that can lead to a breakdown in supplier relationships. Automation can:

• Streamline purchase orders and establish approval workflows to ensure accuracy on the buyer end and reduce fulfillment and lead times. 
• Help set delivery and payment expectations by sharing information and highlighting critical data. 
• Ensure payment terms and important information are accurate and timely. 
• Avoid issues such as missed cancellations or service disruptions by creating reminders for upcoming contract term dates. 
• Provide data and usage information for intelligently negotiating renewals. 
• Have access to data and tools for performing lifecycle management, onboarding, and offboarding. (A strong supplier relationship includes properly handling the end of the arrangement). 

By streamlining your supplier management into an automated platform, you’ll have all relevant information at your fingertips to guide and fortify the supplier relationship from one contract term to the next.