Answer this: As a healthcare organization, do you trust your vendors to cover your back in an emergency? You should.
COVID-19 disrupted healthcare vendor relationship management. Promises and business relationships were broken.
You must learn how to get the best out of your vendor, or it will cost you money.
This article will help you sleep better at night by learning how to increase trust in your vendors.
The End of Vendor Relationship Management as We Know It?
The pandemic shocked the healthcare supply chain.
COVID-19 hit B2B healthcare suppliers with the worst that could happen: getting purchase orders and not having anything to sell.
Crucial hospital supplies became impossible to find. Patient care suffered.
Could we do things differently?
Numerous aspects of vendor relationships have been questioned, including the following:
- How well-prepared vendors are to respond to emergencies.
- The optimal level of safety stocks that vendors must hold.
- Suppliers’ loyalty to fulfilling their commitments to customers.
- The need to develop a portfolio of emergency vendors.
A lot is going on, but it’s best if you start at the beginning.
The first step to building better relationships with your vendors is understanding with whom you are doing business.
Lessons from the Trenches
COVID-19 highlighted the importance of open communication with vendors. Clear information about inventory levels and delivery times became a priority in the middle of a pandemic. Broken promises and failed deliveries led many vendors to lose business to competitors.
Was this situation avoidable?
COVID-19 took the B2B healthcare industry by storm. It was impossible to forecast, for example, an increase in mask demand in March 2020.
But that wasn’t the main issue. Many vendors, overwhelmed by new orders, didn’t want to miss their chance to boost sales.
Sometimes, it’s best to say no. Trying to sell more resulted in countless failed deliveries.
Why B2B Trust Matters
Truthfulness is essential in business relationships, but in COVID-19 times, it’s a competitive advantage.
Vendors who are frank with their customers gain trust. Numerous suppliers learned this lesson the hard way.
Your procurement team must be ready for vendor defaults. Why?
Because sometimes you have to do things yourself.
How to Be Resourceful
COVID-19 forced healthcare organizations to change.
In the wake of the pandemic, a paradigm shift happened. Healthcare organizations relied on themselves to treat patients. The market wasn’t doing its job.
Hospitals started manufacturing supplies and critical medications.
What does this mean for vendor relationship management?
Your purchasing department can’t just place orders and find suppliers. They must understand the supplier’s manufacturing process to help organizations take over in case of an emergency.
What’s the best place to start?
- Map all supplies that could stop your operation.
- Calculate the interruption’s risk for each supply.
- Consider alternative vendors.
- Assess whether your company can produce critical supplies.
- Quote internal and external costs for this emergency production.
- Compare prices to see the impact of these activities.
Your supply team has lots of work to do, but it’s necessary.
Working with one or two trusted vendors and ignoring the rest of the market are not options these days.
How to Make Friends and Influence Healthcare People
Sourcing teams are the link between healthcare organizations and the B2B market.
In the healthcare industry, guaranteeing the best product is insufficient; negotiations must consider the organization’s workflows.
As a procurement team, it’s your job to tell other departments about purchases that could change the way other people work.
Listen to their priorities and concerns before making a decision that could disrupt their work.
Implementing radical changes without sharing your plans with your peers is a mistake. Procurement teams must facilitate change, not force it.
Are You Leaving Money on the Table with Your Vendor Performance System?
Marketers and sales professionals rely on customer relationship management (CRM) systems to prevent customers from slipping through the cracks. You need to learn from them.
Your vendor management system must be an active decision-making tool.
Vendors and buyers tend to relax as time passes, and this attitude costs you money.
One mistake here, one error there: What’s the harm? Expensive. Big problems result from the minor issues you ignore. Don’t do this!
Track your vendors’ metrics. Talk to them about minor issues to improve. Learn together.
Promote a culture of continuous improvement with a positive attitude; a strong vendor relationship isn’t built by force but from collaboration.
Are You Increasing Your Third-Party Risk?
A vendor who doesn’t understand your business is a risk for your healthcare operation. Communicating your vision with vendors prevents headaches.
Here are some ideas for building better partnerships with your vendors:
- Organize team-building workshops with your vendor representatives to share your vision with them.
- Plan regular events to reward your key vendors to encourage performance and strengthen relationships.
- Get to know your vendors’ staff. Visit their offices and learn about their manufacturing process. Share lunch with them.
Building relationships takes time and feels like extra work, but it’s not. Your operation works better when your vendors like working with you and sharing your business goals.
Does Your Vendor Management Internal Process Cost You Money?
The healthcare industry depends on continuous improvements to flourish. Buyer−vendor relationships can’t be an exception to this mindset.
Pay attention to these critical areas that will save you money if you optimize them:
Your Vendor Selection Process
It should be as straightforward as possible without increasing risk. Complicated approval processes cause delays that affect your own pockets.
Vendor Onboarding
Vendor onboarding shouldn’t be more complicated than open-heart surgery. Simplify your processes.
Vendor Contracts
If you don’t understand a contract, ask your legal team for help. Your healthcare organization thrives when you have clarity.
Vendor Governance
Managing vendors must be an agile process that requires as few unnecessary filters as possible. The information must be visible and shared.
Vendor Engagement
Your business evolves, and it’s critical to tell your vendors about these changes. Make them feel like a business partner, because that’s what they are.
Wrapping Up
Healthcare depends on trust to succeed. Patients rely on their doctors. Doctors trust pharmaceutical companies. And you, a procurement leader, must trust your vendors.
How do you do that?
Communicate with your vendors. Learn about their business, and share your vision.
Build authentic partnerships. This takes time. But it’s an excellent investment that will reduce your stress and increase your revenue.
If you want to create engaging content that shares your business goals with your vendors, please contact me for a discovery call.
FAQ About Healthcare Vendor Relationship
What does vendor mean in healthcare?
A vendor is any business or person that supplies goods or services to institutions like hospitals, clinics, or insurance companies.
A supermarket is a good metaphor for this situation. The vendor functions similarly to a wholesaler that supplies a supermarket with goods for retail sale. A healthcare vendor is a company that does the same thing; however, they sell goods and services to healthcare facilities to improve their efficiency.
Executives in the healthcare industry often develop a fruitful business relationship with suppliers to get enough supplies and services at competitive prices without sacrificing quality. In addition to providing services directly to its customers, payers like insurance companies may also partner with vendors to provide additional benefits to their members.
What is vendor management in healthcare?
Vendor management in healthcare refers to overseeing the relationship between healthcare organizations and their vendors, which could be suppliers of products or services necessary for healthcare providers to execute their operations.
Health plan companies are responsible for managing the health care services for their members, which often involves working with healthcare providers and vendors. They utilize supplier relationship management to ensure they work with reliable vendors that meet their standards to guarantee the continuity of care.
A vendor representative is usually the point of contact between the vendor and healthcare organizations. The vendor representative is responsible for communicating the vendor’s products or services, negotiating pricing and contracts, and ensuring that the vendor meets the healthcare organization’s specifications and policies.
Vendor management is an ongoing critical process to ensure healthcare providers can access the products and services needed to deliver care and improve patient outcomes.
How important is the contract between a vendor and a healthcare provider?
The contract between a vendor and a healthcare provider is a critical aspect of vendor risk management, which identifies, assesses, and mitigates risks associated with supplying to the healthcare space.
A well-written contract can help mitigate risks and ensure the builder gets the house they want, built to their specifications. An analogy to understand this could be a builder who hires a contractor to build a house. The contract between the builder and the contractor outlines the scope of work, deadlines, and payment terms, among other things.
The contract between a vendor and a healthcare provider outlines the terms of their business relationship, such as the products or services to be provided, pricing, and quality standards. A well-written contract guarantees that vendors meet the healthcare provider’s needs and helps manage vendor risk by specifying expectations and obligations.
Effective vendor relations require good communication and transparency, but ultimately, the contract provides the legal framework for the relationship. If either party fails to meet their obligations, the agreement outlines the consequences and the steps that can be taken to resolve any disputes.
