The value of vendor planning
Written by Chris Monti, Senior Negotiator
Credit unions and community banks routinely do strategic planning – the key word being “routine,” because institutions frequently fail to consider all aspects and possibilities, including the tools you’ll need to get the results you want three to five years from now.
A simple example is that of a cross-country road trip. You’ve determined the length of your trip, but once you get started, you realize you didn’t pick key stops along the way for sightseeing, which might have altered your route. When it’s time to stop for the night, you discover your travel agent didn’t pay attention to what you asked for, so you’re stuck in a motel without all the amenities you wanted. To make matters worse, when you open your suitcase, you find out your spouse, who did your packing for you, left out some necessities you need.
What kind of a trip would you have? You’d reach your destination, but would you have achieved your goals? What should have been a pleasant journey turns out to be very stressful.
How did this happen? Like planning a road trip, credit unions’ and community banks’ strategic planning will take the institutions from point A to point B, but, like our example, often doesn’t plan for detours along the way or the mistakes of third parties you need to help you get where you want to go. In other words, what’s often missing from the equation is an understanding of what to do with vendors.
Asking the right questions
What is strategic vendor planning and why is it important? Vendor planning is strategic in that you’re thinking ahead and planning three to five years out. It’s important because it allows you to step back from the daily routine to distinguish between the execution and delivery of what you need now, to what could be done when focusing on projects with the highest strategic impact for the future of your institution.
Planning years out gives you the time you need to ask questions that are proactive instead of reactive. Let’s say you are thinking about a product in digital banking. Here are some questions you might ask your strategic planning team:
- Are we using the product now?
- Is the product maximizing our performance?
- What products do our members/customers expect and demand?
- Are there new products or services available that will improve the member/customer experience?
- Does our competition have these?
- Can our current product be converted to provide new services?
- Are we satisfied with the service we receive for this product?
- Are we satisfied with the product’s performance?
- Do we need to onboard new products or services in addition to or as a replacement for current products and services?
- Do we have the financial resources to support a conversion or onboarding of vendors or services?
You’ll notice that all of these questions center around a vendor’s product or service, the level of performance satisfaction you receive from that vendor, and the ability of the vendor to help you compete moving forward in a three-to-five-year plan. Asking these kinds of questions well in advance gives you the time you need to understand the effect proposed changes will make and how to prepare for them in a comprehensive way, rather than reacting to a problem today. You’ll have the answers and the time you’ll need to plan which vendors you want to move forward with, which are helpful now, but aren’t able to provide future services, and which simply don’t perform.
If you fail to consider the roll of vendors in your strategic planning, you’ll have made a serious mistake that will most likely result in picking the wrong vendors in haste and wasting potentially millions of dollars of your members’ or customers’ money.
Put time on your side
There’s an old saying, “if you make a hasty decision, you’ll have plenty of time to mull over your mistake later.” Making a hasty decision in vendor selection has been shown to limit the outcomes. It takes time to facilitate a well-planned analysis of all the vendors in the selection. Best practices include facilitating discovery calls before the RFPs are answered, plus taking the time to facilitate multiple demonstrations, which may be needed to assess the product. Short-changing any step often results in choosing vendors that are smooth talkers versus ones that can actually do the job.
How much time does it take to review vendor contracts and get the best terms? It can actually take about two years. You must make certain the vendor can actually do what they say you’re paying them for. You’d be surprised how many institutions hire a vendor or buy a product with a contract that doesn’t say in writing the company has to do what you’re buying from them. And, if the product does perform, the contract may say nothing about how the product and vendor are going to help you move forward toward your strategic goals or provide key performance indicators. Sign in haste, and you may be signing a contract that will cost you money in poor performance, cost you again to fix the vendor’s mistakes and hold you back from reaching your strategic goals.
Taking the amount of time necessary to plan your vendor decision gives you the time you need to present your performance goals to each of the vendors and see how they’re going to help achieve them. Be sure to have vendors include regular updates on how well the product is performing and what steps they’re taking to improve the performance metrics you asked for. Ask them to commit to giving you reports and the information you need to make changes in your planning to achieve the goals you have for this product.
The benefits of vendor planning
What’s in and not in your vendor contract is of paramount importance, but there are many other benefits to vendor planning that can help you thrive.
- Should you consolidate vendors or have a variety of vendors for your services?
- Can one vendor provide what you need, or if you have several, can they work together as needed?
- What are the benefits and risks of consolidation? Of multiple vendors?
- Are you getting the right product with the right usage for your institution or are you paying for products and services you don’t use?
Agility and flexibility
Another value of strategic planning for vendor selection is allowing enough time to pivot and adapt in the process if your priorities change. For example, when the pandemic hit, many institutions that had begun short-term vendor selection and negotiation were unable to stay on track and lost ground. Those that had begun planning and starting negotiations early had time to pull back and reengage at a later date. They still had enough time before their current contracts ended to resume and complete the decision-making process to renew or negotiate a new vendor contract and terminate the existing contract or begin the new service on time. These institutions planed ahead and had ample time to make agile decisions despite unanticipated scenarios like a pandemic.
How Maple Street can help
The time, effort and knowledge that goes into successful strategic vendor planning can seem daunting. That’s why Maple Street makes it easy for you. We help you through the entire process from start to finish.
Maple Street will:
- Help you manage your contracts and show you the options you have for vendor planning in the next three to five years
- Work with the stakeholders on your team to help plan for and develop the strategies in your project
- Walk you through every step of the decision-making process to ensure you’re completing everything needed
- Work with you to negotiate the price, contract and your performance goals for the product to ensure your goals are met with the purchase.
- Give you enough time not only to complete the project despite what comes up on a daily basis, but also time to adapt and change should a new direction be needed.
It’s never too late to make the time needed for strategic vendor planning. Maple Street can help and keep you from wasting needed funds so you can implement your long-term projects. Call 800-513-6839 or email firstname.lastname@example.org.
Get laser focused on managing your vendors now!
Request a meeting with a professional vendor management expert today