Top 10 vendor management skills & how to develop them
Vendor management skills are a must-have if the goal is to score better vendor contracts and increase profit margins. Here’s what it takes.
Businesses can automate a lot of steps within the procurement process. Creating and storing purchase orders, keeping an accurate record of paid invoices, and establishing an internal requisition system can be largely hands-off tasks with the right procurement software.
However, when it comes to vendor management, it takes more than creating set-it-and-forget-it workflows. Ideally, a vendor relationship is managed by a knowledgeable internal contact.
As a result, vendor relationships become proactive endeavors that are mutually beneficial. In this guide, we walk through what it takes to develop the skills to expertly manage vendor relationships.
What are vendor management skills, and why are they important?
Vendor relationship skills enable businesses to maintain ongoing relationships with key vendors for any goods or services the business may need.
Managing vendor relationships can be a nuanced process, and an effective vendor manager ensures strong and lucrative vendor relationships are established, nurtured, and upheld long-term.
The quality of a company’s vendor relationships directly translates to its bottom line. The better a company’s relationship with vendors, the better deal terms they can negotiate, and the more cost savings they can reap.
Why you should work on your vendor management skills
Acquiring vendor management skills pays off in many ways, namely:
Supporting revenue growth with better cost control strategies
Who doesn’t want to save more money? With established vendor relationships, businesses stand to score better deals because trust is established, and both the vendor and supplier know how the other operates.
Once that relationship gap is bridged, and both sides are happy with how the other deals with factors like compliance guidelines, terms and conditions, and relationship ethics, deals can happen quicker. Businesses can now optimize their production lifecycles and inventory management systems.
Maintaining and expanding deal options
By creating a network of reliable vendors, companies spend fewer resources on acquiring new suppliers, the initial vetting process, and getting through the checks and balances initially required to engage with salespeople.
Proactively maintaining relationships with key vendors ensures you have a bigger pool of options to choose from, which allows procurement teams to optimize for value and simultaneously keep costs down.
Improving profit margins by scoring early payment discounts
Healthy vendor relationships open the doors to better deals. Once trust is established, vendors may offer perks like early payment discounts, better rates, and flexible payment options.
Top 10 vendor management skills
[1] Communication skills
Vendor communication skills — both verbal and non-verbal — are a must-have for vendor managers who want to optimize for the best outcomes throughout the life of a vendor relationship.
Knowing when to listen before countering with a rebuttal, being aware of non-verbal body language in meetings, and even knowing how to speak in terms that make vendors excited to work with you are all key to effective communication. Active listening and the ability to pick up on inferences tend to increase the quality of vendor relationships.
[2] People skills
A vendor relationship manager stands to gain a lot by being people-oriented. While some people have a natural knack for interpersonal connections, others may have to spend time refining their relationship-building skills. The good news is that, with enough practice, these skills can be learned.
Being a good relationship builder takes a basket of “mini” skills that come together to make relationship-building efforts a success. =
These include—
- Emotional intelligence
- The ability to empathize
- Team building know-how
[3] Resourcefulness
Can you see an alternate answer to a seemingly unanswerable problem? Can vendors count on you to be flexible to arrive at mutually beneficial deals? To keep relationships strong, being resourceful is a key skill.
Being resourceful ensures smoother negotiations and more open communication. Bringing all the necessary pieces to the table, pivoting when necessary, and being flexible in finalizing contracts ensures higher success rates.
[4] Financial literacy
Interpreting the numbers is invaluable to the vendor relationship-building process. Financial literacy with plenty of accounting know-how can take a vendor relationship manager from good to great. Why is that?
The repeated exchange of value between businesses and vendors involves currency, which requires the application of finance and accounting principles to ensure you’re getting the most value out of your supplier. With financial know-how, managers can easily maintain budgets while handling supplier relationships.
Creating deals based on key metrics is vital in ensuring companies save as much as possible throughout the procurement process while also acquiring the most value.
[5] Negotiation skills
A good negotiator has plenty of people skills yet never loses sight of their end goal. Negotiation skills ensure beneficial deals are closed while maximizing long-term cost savings.
The ability to articulate the value of working with your company is a must-have if the goal is to establish valuable vendor relationships. Additionally, knowing when and where to add value during the end-to-end negotiation process ultimately translates to better profit margins — which is what every company wants to optimize in contract negotiations.
Some key negotiation skills include—
- The ability to think logically on your feet
- The ability to uphold boundaries when negotiating
- Being able to express the value you bring to the table
- Working through fear to arrive at better deals
- Confidently approaching meetings and introductions
[6] Networking
Confidently approaching vendors and initiating contact ensures you’re able to keep your partnership options open and build relationships as your company changes direction or scales. Plus, vendor networking is a way to approach risk management as you stay in touch with suppliers in your industry.
Often, networking skills boil down to consistent contact with key stakeholders in industries relevant to the company. Many of the relationship skills overlap with the ability to successfully network, like—
- Being socially savvy
- Interpersonal skills and being able to empathize
- The ability to communicate your company’s value
- Actively listening and communicating
[7] Marketing and sales skills
Closely tied with communication and negotiation skills, a relationship manager’s marketing skills can do a lot to get vendor contracts to the finish line. Maybe you need to convince a potential vendor to agree to a year-long contract with you. In this case you’d need the ability to clearly sell your value proposition and be ready to answer possible objections.
[8] Collaborative teamwork
Effective vendor management doesn’t happen in a vacuum. Relationship managers often interface with internal and external stakeholders to ensure deals are closed, SLAs are enforced, and visibility is ensured throughout the process.
Seamlessly working with your vendor management team to maintain key supply chains makes for a more cost-effective system. It’s a way to optimize the production lifecycle because you’ve established predictable supply options.
[9] Project management
Project management is a foundational skill that enables vendor managers to keep track of many moving parts.
Vendor managers at growing companies must maintain vendor relationships while interfacing with procurement teams and third-party stakeholders, like customers. Keeping track of various requirements is critical to arrive at a successful and mutually beneficial contract.
Project manager skills include—
- Technical know-how
- Time management
- Critical thinking
- Leadership qualities like assertive decision-making
- Risk mitigation
[10] Logical thinking and decision-making skills
Selecting vendors, sourcing goods and services, managing vendor contracts, and assessing vendor performance all require logical thinking and strong decision-making skills. This is because there can be several variables and data points to consider as you try to optimize for value.
While some parts of the vendor management strategy can be automated through templates or outsourcing processes, vendor management requires skill sets with a human touch that software can’t quite fulfill.
How to develop vendor management skills
Say you’re interested in scoring a vendor manager job. Where should you start if you want to acquire the necessary skills?
Just like any other skill worth acquiring, developing vendor management skills takes practice — it often takes years of experience to refine the soft skills required to thrive on the job.
Some of the best ways to acquire the basket of skills necessary to ensure you thrive in a vendor management position are—
Gain work experience in relevant departments: If you’re already working within a company with vendor management roles, work in several departments to proactively learn on the job and gain relevant skills. Working in the finance department, as a procurement specialist or officer, or in HR gives you the experience necessary to thrive in a relationship-building environment.
Take a course: There are plenty of education platforms that offer high-level vendor management courses, like this supplier management course on Coursera. Seek education on supplier management, negotiation skills, and risk management.
Being resourceful and taking advantage of as many sources of information as possible is a pivotal initial step into the vendor management world. As you pair your learned skills with real-life experience, you build the skill set necessary to be an effective vendor manager.
Build internal relationships first: In other words, start where you are. Build internal relationships within your current position. While this can result in eventually moving within a company to a vendor management position, it may also result in outside opportunities you wouldn’t have come upon otherwise.
Plus, as you try your hand at building internal relationships, you’re already practicing a key vendor management skill — networking.
How do vendor management tools help?
Long-term relationships are the bedrock of successful vendor management practices. Once established, they unlock a flurry of mutual benefits both vendors and buyers can use indefinitely.
Adding dependable vendor management tools to the mix enables procurement teams to level up their vendor relationships. What does this look like exactly?
Vendor management tools help procurement teams by providing—
- Vendor onboarding tools
- Integrations
- Purchase order and invoice payment automation
- Contract management features
- Risk mitigation
- Automated vendor data analysis and reporting
While vendor management software can’t exactly give you a helping hand with the soft skills that are critical when managing vendor relationships, it does help you excel where administrative and data-driven tasks are concerned.
Processing payments with the help of automation creates a simple process while ensuring your invoices are paid on time. Vendor management software helps keep a log of all your vendor contracts in one place and extracts their key data to optimize your contracts.
Check out our list of top procurement software built to streamline your vendor and procurement systems.
Expertly manage software providers with Vendr
Vendor managers can pull from plenty of resources to refine strategy, optimize for growth, and see results that translate to positive profit margins.
If you’re at a loss for where to start, consider beginning with streamlining your vendor management process. With a SaaS buying and management solution like Vendr, procurement teams strike better data-driven deals, efficiently manage contract renewals, and proactively discover new vendor relationships.
Get some insight into how much you could save with Vendr’s free savings analysis.
