During the early years of your retail business, you might make all your products yourself and be the only vendor. You may spend Sunday afternoons curating essential oils and handmaking soap.
As you scale your business, those late nights and weekends spent making soap take their toll. To keep up with customer demand, you may source custom-made soap from multiple vendors.
But, instead of making soap, you stay up late, manually handling orders, tracking inventory, and managing invoices. Your growing retail business deserves effective vendor management software. Ahead, you’ll learn how software can help, how to manage vendors effectively, and the top tools available.
What is vendor management?
Vendor management is the process where retailers choose their suppliers, negotiate deals, and monitor their performance. The goal is to secure quality products at competitive prices and maintain a reliable supply chain. Effective vendor management improves product availability, reduces costs, and improves customer satisfaction.
📚Learn more: What Is Vendor-Managed Inventory (VMI)? Definition & Benefits
Why is vendor relationship management important?
Vendor management is important for retailers because it helps them source better products at good prices. It also helps ensure those products are always available for customers.
By building strong relationships with suppliers, you can negotiate deals that lower costs and improve product quality. This process also helps solve problems quickly, keeps deliveries on time, and ensures that stores are well-stocked. Ultimately, managing vendors well leads to happier customers and helps retailers stay competitive and responsive to shoppers’ needs.
How do vendor management software tools help?
Vendor management software tools are a central place for retailers to manage their suppliers. From boosting efficiency to lowering your costs, there are multiple benefits to using vendor management software tools:
Increased efficiency and automation
Vendor management software automates everyday jobs like placing orders and tracking payments, saving your time and reducing mistakes. Once you start automating manual tasks, you’ll find more time to focus on more valuable business tasks.
Enhanced communication and collaboration with vendors
Most software comes with features to help you communicate with vendors. This means fewer misunderstandings and better teamwork, helping retailers and vendors solve problems quickly and work together smoothly. This leads to better relationships and can even help get you better deals and products.
Improved vendor performance monitoring and analytics
Using the platform, you can view useful insights and data highlighting vendor performance. That way, it’s easier to see which suppliers are doing a great job and where you could make improvements.
Strengthened risk management and compliance
As you begin purchasing goods from vendors, you’ll need to identify ways to manage risk and ensure compliance.
Using tools can help you gain a broader perspective and spot potential risks, such as supply disruptions or compliance issues with laws. This way, retailers can avoid problems before they happen, keeping their businesses safe.
Cost optimization and spend visibility
When you automatically track your inventory and vendors, it’s much easier to see where your money goes and how you can save.
You can also view detailed insights into spending patterns, helping stores identify opportunities to cut costs and negotiate better deals. This visibility ensures that every dollar spent is an investment in more efficient operations, helping you manage a budget.
💡TIP: Inventory management software can also help you track stock in real time.
Faster, higher-quality vendor onboarding
Using a central platform makes it easier to onboard new suppliers. You can quickly start working with new vendors without the usual delays and with less hassle.
The software stores all the important vendor details so retailers can offer new products faster and maintain high quality without extra stress.
How to manage vendors effectively
To get the best out of your vendor partnerships, it’s worth following a few best practices. Learn from these experienced Shopify merchants and how they manage vendors.
Select vendors strategically
Before you start working with vendors, it’s important to carefully select those who fit your business. One way to do so is to create a review process.
Josh Neuman, founder of Chummy Tees, a custom T-shirt brand, explains how a standardized review process helps him select and onboard vendors.
“When I first started out, I spent a lot of time vetting potential printing vendors to understand their capabilities, costs, turnaround times, and quality. I developed a standardized review process to evaluate each vendor's credibility and ensure they would be a good long-term partner for my growing business.”
📚Learn more: Vendor Sourcing: The Ultimate Retail Business Guide (2024)
Prioritize risk management
Guillaume Drew, founder and CEO of Or & Zon, a luxury brand that curates sustainably produced artisanal products, shares that merchants need to consider their vendors’ compliance too. The laws and standards your business must follow will depend on your location and the type of goods you sell too.
“Risk management and compliance are paramount to us because we deal with culturally sensitive items. We ensure our products are ethically sourced, respecting local traditions and practices.”
📚Learn more: How To Identify and Prevent Vendor Fraud
Communicate clearly
Neuman of Chummy Tees explains that regular check-ins with vendors help eliminate misunderstandings and keep everyone on the same page.
“I like to overcommunicate with my vendors, providing weekly status updates on orders and monthly business reviews so we're all on the same page. This helps eliminate issues down the road,” he explains. “I also gather feedback from my vendors on a regular basis to ensure we continuously improve our partnership.”
Drew of Or & Zon explains that solid communication sets the right tone for solid partnerships.
“Communication is a two-way street. We ensure clarity about our expectations and are attentive to our vendors’ needs and feedback. This builds a solid foundation of trust, critical for long-term collaboration.”
Set KPIs for each vendor
Setting KPIs helps your business and vendors meet realistic goals. At the start of any collaboration, agree on KPIs with each vendor. Depending on your business, these could include maintaining on-time delivery or product quality standards.
Neuman of Chummy Tees explains how he sets and tracks KPIs in a central dashboard.
“To monitor performance, I set key performance indicators for each vendor tailored to the services they provide. Some examples include on-time delivery percentages, quality defects per order, and average response times. I track these KPIs in an online dashboard to stay on top of how each vendor performs versus the targets. This holds them accountable.”
Drew of Or & Zon explains that Shopify helps the brand manage multiple global vendors, ensuring quality control and reliable delivery times.
“Performance monitoring is essential, especially given the international diversity of our artisans. It's not just about delivery timelines and quality control, but also about building an environment that helps them thrive. We use custom tech integrations on Shopify to facilitate this process and maintain real-time tracking of performance metrics.”
4 best vendor management software
With so many vendor management software options available, it can be hard to choose the best one for your business. So, we’ve narrowed it down to four of the best options.
1. Shopify
Shopify offers a simple way for retailers to manage their vendors directly within the platform.
It’s easy to associate vendors with specific products, so you can track which vendor supplies each item. This will give you an overview of your supplier relationships and allow you to restock popular products.
When you assign vendors to products, you can quickly analyze sales trends and evaluate each vendor's performance. This vendor data helps you make better decisions about commissions or incentives.
Key features:
- Easily monitor stock levels for products from different vendors
- Quickly find vendor information by sorting and filtering based on different criteria
- Assess vendor reliability and product quality to optimize your supplier relationships
- Create reports to analyze vendor-related data, helping you make informed decisions about your inventory and sales strategies
Pricing: Starts from $29 per month
2. Kissflow Procurement Cloud
Kissflow Procurement Cloud is designed for retailers who need a robust tool to manage their vendor relationships at scale. It automates the procurement process, making it easier to handle everything from purchase orders to vendor contracts.
Spend analytics are helpful for getting detailed visibility into spending across all departments so you can make informed purchasing decisions. Tired of all the admin that goes with new vendor relationships? When you’re onboarding new vendors, it’s easy to create custom approval workflows and a centralized contract repository.
Key features:
- Create, send, and track purchase orders with ease
- Gain insights into your spending patterns to better control costs and budget efficiently
- Keep all vendor information in one place and track interactions, performance, and compliance
- Automate the entire procurement process, from request to purchase, to save time and reduce errors
- Customize dashboards to keep important metrics front and center for better decision-making
Pricing: Starts from $1,500 per month
3. SAP Fieldglass
SAP Fieldglass is a versatile procurement software that’s helpful for retailers who want to
oversee and optimize their supplier relationships. This platform excels in managing everything from contract negotiation to performance evaluations.
Highlights include a project management dashboard that governs your vendors’ statement of work. Detailed analytics let you monitor timelines and quality to help ensure products arrive on time and are high-quality.
Key features:
- Use advanced analytics to gain insights into vendor activities
- Track and analyze supplier performance to ensure quality and reliability
- Manage contracts with a centralized system that keeps track of terms and compliance
- Identify and mitigate risks associated with suppliers to protect your business operations
- Facilitate better communication and collaboration with vendors through integrated communication tools
Pricing: Packages are tailored to each business. Contact SAP Fieldglass for more details.
4. Procurify
Procurify is user-friendly procurement software that simplifies retailer-vendor relations. It’s designed to streamline the entire procurement process and ensure that businesses can track their spending.
Helpful features include the ability to integrate external supplier catalogs into Procurify, which allows you to order items more quickly and easily. You can also store centralized vendor records so your team can make renewal decisions, negotiate terms, and assess risk.
Key features:
- Submit and approve purchase requests quickly from the platform
- Keep all your vendor information organized and accessible, enhancing relationship management.
- Monitor and control your spending with detailed insights into where your money goes.
- Customize approval workflows to ensure purchases are always within budget and policy.
- Access real-time data and reports to make better-informed decisions about your procurement strategies.
Pricing: Packages are tailored to each business. Contact Procurify for more details.
Build a better vendor management system
Using a vendor management system will help you scale up your retail business more efficiently. Instead of trying to hunt down that one supplier contract or track vendor sales, you’ll find all these important details in one central platform.
The best vendor management system is one that makes your life easier. Whether you manage five vendors or hundreds, vendor management software is the right choice.
Vendor management FAQ
How do I mitigate potential risks and ensure compliance when working with vendors?
To mitigate risks and ensure compliance when working with vendors, start by carefully selecting reputable vendors and clearly defining contract terms. Regularly monitor vendor performance and compliance with standards. Use vendor management software to keep track of all activities and maintain detailed records. This will help you spot potential issues early and address them quickly, keeping your business safe and compliant.
What are some common challenges in vendor management and how can I overcome them?
Some common challenges in vendor management include inconsistent product quality, late deliveries, and communication issues. To overcome these, establish clear expectations and contracts with your vendors. Regularly review their performance and maintain open lines of communication. Use vendor management software to streamline processes and keep everything organized. This helps ensure smoother operations and better relationships with your suppliers.
How do I select the right vendors that align with my business goals and requirements?
To select the right vendors that align with your business goals, start by defining your needs and quality standards. Look for vendors with a proven track record, offer competitive pricing, and share your values and commitment to quality. Conduct thorough research, check references, and consider their customer service and reliability. Finally, choose vendors who can grow with your business and adapt to changing needs.
What are some best practices for effective communication and collaboration with vendors?
For effective communication and collaboration with vendors, follow these best practices:
- Regular updates: Keep in touch often, sharing updates and feedback to avoid misunderstandings.
- Clear expectations: Set and agree on clear expectations about timelines, product quality, and communication.
- Use technology: Use vendor management tools to streamline communication, track progress, and manage documents.
- Build relationships: Treat vendors as partners, showing respect and appreciation, which fosters good cooperation and loyalty.
