Call Don today: 951-533-4966


Don Welker's Financial Minute

Dec 12, 2017, 7:06 PM


A while back I was working for a firm in the oil business. We had an “exclusive vendor” supply contract with an independent petroleum refiner for certain service stations. We committed to ensuring that these service stations would purchase an agreed-upon amount of the refiner’s gasoline over a five-year period, and that they would only purchase the refiner’s brand gasoline. In exchange, the refiner covered the costs associated with branding these service stations, and paid for a national advertising campaign for their brand of gasoline. It was a “win/win” for everyone involved.

Should you pursue exclusive relationships with your suppliers?

Many organizations find it beneficial to enter into exclusive vendor contracts whereby they agree to make a particular supplier their only supplier for a given set of products or services. The potential benefits include better prices, better service, marketing assistance, and the ability to sell products that have brand recognition.

On the other hand, there is one major drawback: Exclusive vendor relationships make you dependent on one supplier, which always carries certain risks. As with any decision, you’ll want to analyze the pros and cons of each particular situation before moving forward.

What can you do to nurture your supplier relationships?

What I see in the field is that most businesses know who their top five customers are, and place a lot of value in that. But they don’t realize that it’s just as important to recognize who their top five suppliers are, and value them in the same light.

Whether or not you have exclusive relationships with your suppliers, your vendor relationships are just as important as your relationships with your customers or your bank. Some of the best ways to nurture these relationships are to:

• Be loyal.

• Provide adequate lead times.

• Pay your bills on time, and within the agreed-upon terms.

• Honor any volume-based purchase commitments.

• Be pleasant to work with and treat them fairly.

• Keep them informed about what’s going on in your company.

• Communicate about any issues that may be preventing you from honoring your commitments. For example, your needs have changed and your primary supplier is not offering what you need. Or maybe other suppliers are now offering better pricing. Give your primary vendor an opportunity to work things out with you.

Your vendor relationships are like partnerships. They want you to be successful so you can continue to buy from them. And you want them to do well so they can continue to meet your needs.

Loading Conversation