Authored by Mickey North Rizza
When I was a practitioner, one of my former companies hated the word “vendors” to discuss suppliers so much that if you used it, you were asked what circus vendor you meant (vendors were considered circus suppliers, not business suppliers.) And “partners” were considered your top 50 suppliers in the top right section of the Kraljic matrix. Today the world is composed of all sorts of suppliers and some of these suppliers are really partners to our business. It is important that we understand the difference between vendor and partner. Because it can make a substantial difference to the way we work with them, how they work with us and the joint value we both can bring our business.
Vendors are typically those that offer something for sale that we purchase. The typical vendor relationship involves transactions, with well-defined deliverables. This transaction between the vendor and buyer is managed by a straight-forward contract or purchase order. Performance is straight-forward – on time or not, quality or not.
Vendors assign a sales representative or two to assist you in your order placement, finding a solution from their product line or to discuss the opportunity for more business. The buyer and seller have just a few touch points between them, such as the sourcing/procurement department with the vendor’s sales representative; accounts payable with sales; or supplier quality with sales.
Partners are typically defined in a more expansive way in terms of service, technology, product, market or cost. This relationship is structured around open-ended outcomes that make it much more difficult to manage. An example might be a new technology, such as a sourcing technology, that has been introduced to streamline the current business process and provide greater transparency. Partners usually meet more often to discuss ongoing concerns such as training on the sourcing technology for both buyer and supplier, use of the technology and its outcomes, changes in types of events or structures to make the use of the technology more efficient, and the performance of the technology to date. Partners will discuss their concerns together and make major decisions jointly, understanding that conflicts or time delays can ensue if decisions are made separately. Partners manage the relationship together, focused on the requirements and performance to date, milestones, payment, and changes needed to bring more users to the system and greater utilization of the full technology.
The touch points between partners is more comprehensive and typically goes from top-to-top and bottom-to-bottom. The supplier partner will usually have a customer intimate representative; that is, someone who is there for the life of the relationship, who monitors and coaches the relationship, has processes for resolving conflicts and managing success, develops and manages close ties between upper management, and who develops ties to all levels of the business. These multiple levels of communication provide an opportunity for all employees of the buyer partner to interact closely with the supplier partner – gaining knowledge, asking questions, discovering new paths to success and pushing the supplier partner to provide for even more solutions and innovation. Partners also understand the change you’re about to go through, and are a critical resource to rely upon for help in managing that change, providing advice and assistance, event support when you need it, etc. The partner is someone who cares about your business’ long-term success, not just a single transaction.
The next time you interact with a supplier ask yourself is this a partner or a vendor? Is it a source that we can get more out of to make our business better or is it just a transaction that we need fulfilled? The answer might surprise you.