Hank Darlington: 30-plus vendor evaluation points
I hope you would agree that your suppliers and vendors play a key role in your showroom success. Having a formalized system in place to track and evaluate supplier and vendor performance is essential to the smooth operation and proper profitability of your showroom.
The most successful showrooms embrace their suppliers and vendors, viewing them as partners in helping to grow the business. Making sure that you maintain a mutually beneficial partnership will impact the price you are negotiating today and the quality of service you get in the future. You and your most important vendors need to have strategic meetings to review the performance of both parties.
Too many showrooms have a combative relationship with their suppliers and vendors. If you put on the brass knuckles and try to beat up on your vendors to get better prices or better terms, you’ll learn this is a shortsighted way to do business. Unfortunately, I learned this way of doing business while working for a couple of large wholesalers. When I started our showroom business, I decided to take a different approach. The old adage “you will attract more flies with honey than you will with vinegar,“ probably applies here, or you’ll make more friends by being nice than being rude.
Instead of getting stuck on price, focus on functionality of products and optimum service. You should try to understand what value a given vendor might bring to your business. Having said that, I believe every showroom should have a system in place for evaluating existing vendor partners and for selecting new ones.
When we started our business, there were really only three decorative faucet manufacturers. Selecting partners was easy. But 5 years later, there were dozens of vendors — and I was guilty of trying to do business with too many of them. I found that showing and selling faucets from 15 different vendors was counterproductive. We weren’t important to any of them, and our customers and salespeople were confused by having so many choices.
That’s when I developed a vendor performance evaluation system. I had a form with 30-plus separate areas on which to evaluate the vendor. My team and I would sit down once a year and do an evaluation of all of our major vendors — and even a few of the smaller ones. The first time we did it, we were able to eliminate 10 of our 15 faucet suppliers. All of a sudden, we were a more important partner to the five remaining, and in several cases, we were able to improve the buy side (cost) of these products.
Supplier/vendor evaluation tips
The following are some tips that should help you evaluate your suppliers/vendors:
Establish performance indicators. You need to determine what characteristics a vendor needs to have to do business with you. Do like I did and create specific performance criteria for tracking and evaluating your suppliers and vendors — and do it on a regular basis (at least once a year). In a few moments, I’ll list the 30-plus areas we used to rate our vendors.
Classify multiple suppliers and vendors. If you are like most showrooms, you have multiple suppliers of faucets, plumbing fixtures, tubs, hardware, etc. Try to rate them in order of importance (sales and profit potential). You may end up with a list of both critical and noncritical vendors.
Devise an evaluation method. Possibly use my forthcoming list, ask each of your team members to do a rating from their perspective. If you use my list, or develop your own, have a rating system. Maybe use 1 (low) to 5 (high). Whatever you do, some means of measurement will be very important.
Assign responsibility for reviewing the data. This might be the showroom manager or whoever is in charge of purchasing. We always held a team meeting, which allowed everyone to give input and have a say.
If possible, do a strategic sit-down with the vendor representative and their boss. Just like employees and their performance evaluations, each vendor deserves to know how you believe they are performing. There will be areas that need to improve, so developing an action plan will be important. There also will be some areas that get high ratings, so say thanks and remember, giving “pats on the back” when deserved is appreciated. Set timeframes for improvement. Set goals and track how they are being met.
Cut out the weak links. Every chain is only as strong as its weakest link. So if you have some vendors that don’t make your performance expectations, get rid of them! I’m sure they would do the same if you were underperforming.
34 more evaluation tips
Here are my 30-plus items that you might consider using to evaluate your vendors. Use the 1 to 5 scale.
- Review the vendor by:
- Brand awareness and recognition
- Breadth and depth of the product line
- Overall quality of the products
- Price point (as it relates to your showroom)
- Overall service
- Purchase cost (multiplier)
- Sales potential
- Profitability potential
- Exclusivity within your marketplace
- Their current market share in your marketplace
- Company history, ownership, reputation
- Their position in the industry
- Their financial status
- Their warranty program
- Terms of purchase
- Cash terms
- Days due
- Overall delivery of products
- Lead times
- Freight costs
- Training of your showroom team
- Are there co-op advertising funds available?
- Do they offer a volume rebate program?
- Are there special event promotion dollars available?
- Quality of infrastructure and brochures
- IMAP program to protect Internet sales
- Order placement procedures — easy or hard?
- How they advertise and promote their brand/products?
- Do they sell to the big boxes?
- Do they participate with buying groups?
- Do they help set up displays and change out products when needed? How is their return goods policy?
- How do you rate the local representative?
- Do you have a relationship with the owners or management?
- Is their pricing and catalog customer friendly?
- Are they good communicators?
- Does your showroom team like/push this vendor?
- Will they participate in spiff programs?
- Do they offer any digital/technological help/programs?
This list also can be used to evaluate a new potential vendor, and it should help you determine whether they should be part of your team or not.
The whole purpose of this exercise is to help you maintain the best vendor partnerships possible. It will help both you and the vendor improve areas that need it.