Getting Ready for a Recession: How to use vendor management to prepare for and weather the storm
Your vendor management program can mitigate the pain of a recession. So, as you review and revise your plans, using your vendor management system wisely can make a big difference in how well your credit union or bank will meet the challenges of a struggling economy.
We recommend building a vendor plan. After you review and, perhaps, revise your strategic and operational plans, a vendor plan involves taking a hard look at the vendors you currently have, particularly those you count on to meet your plan requirements.
Your plan should include these elements:
- Assess renewal terms – check the renewal terms on all your major contracts to make sure that no renewal term is longer than one year. A renewal term of more than a year will never work to your advantage and reduces your flexibility in structuring your contracts to maximize your resources and negotiation power.
- Review your vendors’ performance – even if it’s at a very high-level, and ask a simple question: Are you getting what you expect from the vendor? If not, it’s time for a chat with the vendor and modification of your current arrangement.
- Assess vendors’ services – review your current vendors to determine if they provide the new services and products you want or if you will be gathering proposals to evaluate different vendors. If so, the time frames for changes will be significantly longer and you may need to do some resource planning.
- Build an expense reduction plan – start by evaluating all of your large, expensive contracts or contracts with lengthy terms. Pay particular attention to contracts that have not been recently negotiated, as these often have the best opportunities for expense reduction.
- Build your vendor tactical plans – determine how and when you will deal with each vendor based on the time and resource you expect to have available. The tactical plans should provide realistic time frames for what vendor contracts will be addressed and when, based on available staff time and resources, together with your strategic and operational plans. (This is why you’ll want to structure contracts with renewal terms no more than one year.)
A well-crafted and thought-through vendor plan greatly increases the likelihood of success meeting your strategic and operational goals, strengthening your credit union or bank for the coming storm and beyond. Your vendor management program can be an asset or a liability during a recession. We’ll help you make it an asset with positive returns.
Maple Street’s Vendor Advantage System® is the only complete vendor management system that uses supply chain management principles to manage vendor lifecycles to reduce expenses, improve vendor performance, and manage risk. We have the expertise, knowledge and tools to help build and maintain an effective vendor management system. Our services include vendor planning, contract management, due diligence monitoring services, vendor selection, and contract negotiation.
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