Vendors are just middlemen—sellers of the supplies, tools, technology, and services your healthcare organization needs, right? Unfortunately, most healthcare organizations view their work with vendors as a “buyer and seller” relationship—the vendor or supplier provides goods or services to the healthcare organization, and the organization pays the vendor.
If this is the approach your healthcare organization takes to vendor relationship management and supplier relationship management (SRM), chances are you’re passing up opportunities to produce strong working relationships that benefit you in many more ways than just fiscally.
- By splitting into “buyer” and “seller” roles, organizations automatically put themselves on the opposite side of the vendor.
- This approach is transactional in nature: Each side tends to value the other only in terms of what it can do for them.
Healthcare organizations rely on vendors for everything from transportation and medical supplies to IT, laundry services, and waste removal. Think back to the supply chain woes around personal protective equipment during the pandemic for a prime example of vendors’ essential role in healthcare. Without them, there would be no day-to-day healthcare operations.
And because vendors and suppliers touch so many areas of the organization, vendor relationship management—like customer relationship management—must be a top priority for healthcare leaders. symplr offers strategies for healthcare organizations to strengthen their relationships with vendors for optimal results.
What is vendor relationship management (VRM)/supplier relationship management (SRM)?
Vendor management enables organizations to control the entities and individuals they do business with to access the needed services, supplies, technologies, people, and more. A health system may partner with a vendor for a single deal or contract, or the relationship may endure for years. Either way, it benefits the healthcare organization to manage the relationship as a valuable partnership with the primary goals of:
- Optimizing costs
- Maintaining high service levels
- Mitigating risks
Vendor relationship management and supplier relationship management is about creating better working relationships with vendors and suppliers. Organizations do this by moving away from the buyer/seller dynamic, focusing instead on building partnerships with their vendors. When implemented correctly, vendor relationship management or supplier relationship management puts the organization and the vendor on the same side and gets both parties working together to reach common goals so that when one succeeds, the other does too.
What is vendor risk management?
Vendor relationship management also includes vendor risk management—a collection of activities that costs the healthcare industry nearly $24 billion per year. Because of the high cost of failing to manage risks, healthcare organizations must allocate the time and resources needed to manage their vendor risks, which include:
- Data security risks, which are growing in the cyber age—but are better managed using software as a service (SaaS) platforms
- Compliance risks, like failing to properly credentialing vendors before providing them with physical or virtual access to any part of the healthcare system.
- Excessive costs/revenue leakage, for example through mismanagement of vendor contracts
- Failure to track obligations set forth in service level agreements (SLAs),which govern your vendor’s responsibility when it comes to providing access to your data
Effectively managing vendor relationships can help healthcare leaders and organizations manage risk. Remember, vendor relationship management helps organizations move beyond a transactional (sometimes even adversarial) relationship with vendors by fostering a sense of partnership and shared responsibility between the organization and its vendors. If your organization’s vendors feel like they’re a part of the team, and are striving toward a long-term relationship, they’ll be more likely to proactively address any potential risks on their end—rather than waiting until after you’ve spent significant amounts of time and resources performing vendor audits and finding the issue yourself.
Why you should periodically assess vendor relationships
Like any area of a healthcare organization’s business, vendor relationship management and SRM are ongoing processes, and these partnerships must be periodically assessed and evaluated. Regular assessment of your vendor relationships helps identify potential pain points that could negatively affect the relationship down the road, allowing your organization to spot and address problems early before financial or other ramifications snowball.
The COVID-19 pandemic is an ideal case study on the value of fostering strong vendor relationships. The pandemic has posed a number of challenges to the way healthcare organizations and vendors operate, particularly when it comes to remaining compliant with constantly-evolving federal and state disease-prevention guidelines and navigating shortages and supply chain issues in virtual environments. The healthcare organizations that maintain strong, collaborative relationships with their vendors and suppliers have been able to more effectively navigate the obstacles posed by the pandemic.
How often should you take inventory of your universe of vendors?
How often you take inventory of your organization’s vendors and suppliers typically depends on the vendor and your vendor management workload. If the vendor plays an integral role in your organization’s operations, it’s a best practice to assess the relationship quarterly or semi-annually.
Ideally, you should take inventory of more peripheral vendors about once per year, but at a minimum this inventory should be performed at least once every two years. However, no matter how often you take a formal vendor inventory, it’s imperative to communicate regularly with all of your vendors. Keep them updated on what’s going on in your organization to further demonstrate your stance that they are essential partners in your business operations.
4 strategies for effective vendor relationship management
Building strong relationships with vendors is a process, but the benefits to your organization are well worth the time and effort you put into establishing and maintaining those relationships. Here are some key strategies to consider as you lay the groundwork for positive and lasting relationships with your organization’s key vendors.
1. Learn about your vendors
Make your vendors and suppliers feel like you’re in this together. The best way to do that is by taking the time to understand their business: what do they need to succeed? And how can your work together help them achieve their own objectives? By understanding the vendor’s business, you can get a better sense of where your organization fits into their operations, the pain points they’re facing, the goals you have in common, and ways to work together to reach them.
2. Teach your vendors about your organization
The truth is, most vendors don’t set out to underperform for their customers. When they do fail to meet your organization’s expectations, it’s not because they don’t care; in most cases, vendors simply don’t have enough information about your organization and its products and services to understand the role their work plays in it. For example, if a vendor knows how much a delayed delivery will affect a customer’s operations and they’re experiencing supply chain issues, they’ll be able to come up with an alternative strategy to address it—rather than leaving it to the customer’s procurement team to source a new delivery on the fly.
Teaching the companies you do business with about what your organization does and how they fit into your operations can go a long way toward strengthening your relationship and making vendors feel like a valued part of the team.
3. Communicate & keep vendors informed about the big picture
If the companies you do business with only hear from you when you need something, it will be difficult to maintain strong relationships. Regular communication is crucial, and it doesn’t have to be limited to the areas of your operations that they’re directly involved in; after all, what happens in your organization will affect your vendor’s business as well. Keeping vendors informed about the big picture and the state of your organization will further underscore your trust in them and their value to your organization.
4. Set clear expectations & KPIs and check on them regularly
Surveys of corporate executives and employees have found that 86% of workplace failures are caused by poor communication, and vendor management is no different. Most vendor issues are the result of miscommunication, and that often starts with healthcare leaders failing to properly communicate their expectations as a customer at the beginning of the relationship.
Setting clear, written expectations for the companies your organization does business with goes a long way toward preventing future vendor issues, but it’s not enough just to establish these expectations. The other key piece is regularly assessing your vendors’ performance against key performance indicators (KPIs) to ensure standards aren’t slipping. If they are, KPI measurement allows you to address them before they become a bigger problem.
It’s easier to establish expectations at the outset of the vendor relationship, but if you haven’t already done this with existing vendors, it’s never too late for a reset. Clearly establish your expectations and outline how you plan to measure their performance to ensure that your organization and your vendors are operating from a place of shared understanding and working together. That kind of foundation is what strong vendor relationships are built on.
Vendor management is a crucial part of driving revenues, compliance, security, safety, quality, and cost containment within healthcare organizations, and vendor relationship management helps make the overall vendor management process easier to manage.
Check out our vendor relationship management software solutions to do things the symplr way!