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Golden Rules to Create Value from Vendor Relationships

Golden Rules to Create Value from Vendor RelationshipsDecades back, when Michael Porter talked about the value chain of a business, he was a futuristic thinker. The concept considered the various processes and sub-tasks as building blocks of doing business including inbound and outbound logistics, marketing and sales, operations, procurement, human resource management, infrastructure and technology integration.

In today’s complex and dynamic business scenario, collaboration is the new buzzword. Organizations worldwide realize the importance of being able to get employees from seemingly disconnected functions to talk to each other. Super specialization of jobs is almost passé except for some very skilled physical tasks or extremely niche knowledge workers. And organizations are now relooking at even external collaboration to add maximum shareholder value.

Earlier suppliers, distributors, vendors, service providers and contractors were considered to be outside the business paradigm. They were largely external entities that one could neither control nor share value with. One could perhaps only negotiate with them to derive maximum margins. However, now looking at the value chain more closely, businesses realize that vendor relationship management as a strategic tool is a very powerful game-changer. It affects the bottom-line and impacts quality, turn-around times and customer service scores.

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