The e-commerce industry is one of the best models of a well-coordinated supply chain that creates immense value for all stakeholders. This supply chain features e-commerce brands and all the vendors, suppliers, contractors, and other third parties they work with.
These vendors enable a company to bring their products or services to their target audience. Working with agile, flexible, and quality-oriented vendors also empower the firm to source raw materials, maintain optimum inventory, and elevate their competitive position and profits.
But to achieve all these goals, a robust vendor management program is crucial.
Brand aggregators are especially good at vendor management because they know that managing vendors and vendor relationships is the key to supply chain optimization, economies of scale, and ultimately, brand growth.
Let’s explore how vendor management benefits an aggregator and see how brand aggregators like Ergode manage vendors and vendor relationships!
What is Vendor Management for E-commerce Brand Aggregators?
Brand aggregators work with vendors to supply inventory, pack and label products, manage shipping, and tackle customer feedback. Each vendor might have varying pay rates, points of contact, and contract terms. Coordinating with them can become very complex if the aggregator relies on conventional methods. An effective vendor coordination starts with managing their connections and relationships with each vendor. Here’s where vendor management comes in.
Vendor management is a sustained effort to source vendors, get quotes, negotiate terms and contracts, evaluate performance, ensure regulatory compliance, and manage payments. With effective vendor management, aggregators get the best possible value from each vendor, avoid overpaying for goods or services, and avoid losing money on hidden or unexpected costs. And so can you!
Why Vendor Relationship Management Matters to Brand Aggregators
Relationship-building is a key aspect of vendor management – and no one knows this better than brand aggregators. The reason is simple. It is possible to automate and digitize many parts of an e-commerce business including inventory management, warehouse management, and order fulfillment.
What can’t be automated are the purely human aspects: negotiating favorable terms, resolving challenges, or asking for pricing or volume discounts. All of this is only possible if the aggregator has strong vendor relationships. These relationships empower aggregators to move from passive business-as-usual transactions to trust-based, collaborative partnerships that can be leveraged to ensure smooth operations, mitigate risk, control costs, drive service excellence, and deliver great customer experiences. All in all, partnership-oriented, loyalty-driven vendor relationships can create mutually beneficial outcomes for the brand and for its vendors.
For all these reasons, a relationship-driven and robust vendor management program is essential, whether you are a brand aggregator or a singular eCommerce establishment.
More Benefits of Vendor Management in E-commerce
In this section, we do a deep-dive into some more benefits of vendor management that e-commerce brand aggregators have realized. If you are an e-commerce business, these are the perks you need to know!
Optimize Vendor Performance
With a vendor management system, you can track and measure vendor performance against your contract and agreed-upon Service Level Agreement (SLA). This way, you can ensure that every vendor is performing as expected to help you achieve your goals.
Tracking performance is also a good way to find issues early. You can quickly perform root cause analyses to proactively address challenges before they become problems. You can also actively identify improvement areas to enhance vendor relationships and get the best value from them.
Avoid or Mitigate Risks
Your business is vulnerable to risks which may arise from supply chain disruptions, natural or man-made disasters, evolving regulations, and even unforeseen costs. A vendor management tool will provide quantifiable information to identify such risks, mitigate them proactively, minimize potential material damage, and will provide a detailed picture of the vendor’s risk level. Based on this understanding, you can change the terms of engagement or choose an alternative vendor.
You can also take action to protect your organization. For instance, if one of your vendors recently experienced a cyberattack, you can work with them to strengthen their cyber defenses, especially if they have access to your systems and data, or if another such attack may affect your operations or business continuity.
Vendor management provides increased visibility into your vendor network which will help you understand your vendor-related costs. In addition to known or visible costs, you will also be able to see invisible or previously-unknown costs. You can also understand the source of these costs and control (or eliminate) them to strengthen your bottom line.
Additionally, strong vendor relationships, effective procedures, and process transparency can help you negotiate better rates and terms with vendors. You may get discounts and incentives that can further lower your costs, increase your revenues, and boost your margins.
Onboard Vendors Faster
In the e-commerce business, both speed and agility are vital. As a business owner, you need to swiftly identify opportunities to grow your brand and need to be agile to move into new markets and tap into a new customer base with minimal disruption to your operations or service delivery. But all of this is only possible if you can quickly bring on new vendors – which is a time-consuming and costly activity. This is where a vendor management process and tool will help! It speeds up the entire process, assesses vendors capabilities through data, and verifies their compliance standing. In addition, it will also help aggregators to define service level agreements, set up liability procedures, and verify if they comply with necessary laws (e.g. PCI-DSS or HIPAA).
Managing your vendor network can garner tangible benefits for your e-commerce brand. Strong relationships will build loyalty, enhance collaboration, and improve communications. You can get better rates and terms, minimize the impact of supply chain disruptions, and proactively improve operational efficiencies.
Ergode has helped dozens of e-commerce brands devise tailored vendor management strategies to strengthen their vendor relationships and drive significant financial benefits. If you need personalized advice on how to optimize your company’s vendor management strategy and process, contact us.