Vendor disruptions can have a serious impact on your business operations, customer satisfaction, and profitability. Whether it's due to a natural disaster, a supply chain issue, a quality problem, or a contractual dispute, you need to have a plan to manage vendor disruptions effectively. In this article, we'll share some tips on how to do that.
The first step is to assess the impact of the vendor disruption on your business. How critical is the vendor's product or service to your operations? How long will the disruption last? What are the alternative sources or solutions available? How much will it cost to switch or mitigate the disruption? You need to have a clear picture of the risks and opportunities involved in the situation.
- In my experience managing vendors and global projects over $60,000,000 annually, most responses are reactive responses. I was most successful over 4 decades using a different approach and mindset, as follows: During vendor selection, I made sure I understood: 1) the required skills and history of each vendor. 2. Testimonies of former/current stakeholders 3. Team retention over past 36 months 4. Internal customer support process and issue resolution process. Post selection: 1) shared our mission, vision and value for the effort 2) shared our internal delivery process and issue escalation process. 3) confirmed a common understanding of key terms and lexicon 4) produced an integrated schedule, showing ALL vendors and key milestones.
The next step is to communicate with the vendor and try to understand the root cause of the disruption, their recovery plan, and their expectations. You need to establish a regular and transparent communication channel with the vendor and monitor their progress. You also need to negotiate any adjustments to the contract terms, such as delivery dates, penalties, or incentives, to reflect the changed circumstances.
Begins during vendor selection and becomes very detailed after contract award, with an onboarding session, to create a partnership relationship.
The third step is to communicate with your internal and external stakeholders, such as your management, employees, customers, and regulators. You need to inform them of the vendor disruption, its impact on your business, and your mitigation plan. You need to be honest and realistic about the situation and avoid creating false expectations or promises. You also need to solicit feedback and suggestions from your stakeholders and address any concerns or issues they may have.
Always perform a Stakeholder analysis to inform the communications plan and risk management process. It prevents most surprises, by creating opportunities to address and manage the three categories of stakeholders, ….. Champions, Supporters and Active Challengers.
The fourth step is to implement your contingency plans to minimize the negative effects of the vendor disruption. Depending on the severity and duration of the disruption, you may need to switch to another vendor, use existing inventory or backup resources, modify your processes or workflows, or even suspend some activities temporarily. You need to have a clear and documented process for activating and executing your contingency plans and assign roles and responsibilities to your team members.
Contingency is a byproduct of proper Risk Management, as a response to risk events identified and analyzed. The response is scaled, according to the probability and impact if it did occur. Contingency will seek to reduce or eliminate the probability or impact.
The fifth step is to evaluate the performance of the vendor and your own business during and after the disruption. You need to measure and analyze the key indicators of quality, timeliness, cost, and customer satisfaction. You need to identify the strengths and weaknesses of your vendor management process and your contingency plans. You need to document the lessons learned and best practices and share them with your team and your vendor.
Proper vendor management, like any fair and balanced scoring system, should be outlined in the RFQ, discussed during the onboarding and assessed at regular calendar intervals/milestones, during the execution phase, regardless of delivery tactic employed. Goal: No Surprises
The sixth step is to improve your relationships with your vendor and your stakeholders. You need to recognize and appreciate the efforts and contributions of everyone involved in managing the vendor disruption. You need to provide constructive feedback and suggestions for improvement to your vendor and your team. You need to restore trust and confidence in your vendor and your business. You need to look for opportunities to collaborate and innovate with your vendor and your stakeholders in the future.