Vendor management simply refers to the different ways through which companies organize their suppliers, who are also called vendors.
The process of vendor management generally involves:
- Carrying out research on the most satisfactory vendors for a company
- Getting information about price
- Negotiating and controlling costs
- Vendor selection and engagement
- Measuring and evaluating the quality of work and performance based on company standards
- Monitoring and management of vendor-related risks
- Managing relationships amongst multiple vendors
- Guaranteeing prompt payment and service delivery
Vendors used in different organizations differ based on the nature of the company and what services they offer. In this article, we will concentrate on vendor management in real estate, and highlight its best practices and benefits.
Vendors in Real Estate
In the real estate world, vendors are professionals who offer services for construction, renovations and repairs, purchasing, transportation, designing and all other related needs. These vendors include:
- Real estate agents who handle the completion of sales and contracts.
- Construction project managers and architects who supervise and handle the construction or renovation processes
- Interior designers who handle the aesthetics of indoor spaces
- Maintenance and repairs professionals who take care of all necessary repairs, such as leaky taps or broken door knobs
- Transport companies who ensure a seamless movement of property from the old building to the new
- Property managers who see to the management of the exterior of the property
The process of selecting which vendor is best suited to render any of the services listed above, and monitoring of these vendors to ensure high-quality performance and results, alongside prompt delivery is what vendor management in real estate entails.
Best Practices For Vendor Management in Real Estate
Vendor management does not conclude with the selection of vendors. It goes on to entail certain procedures and practices that ensure your vendor management process is even more detailed and effective. Here are a number of the best practices for vendor management:
Convey Expectations Comprehensively
No doubt, you have hopes and ideas in mind of how you want your property to look at the end of construction and/or renovation. However, your vendors cannot provide you with an exact translation of your expectations if you do not narrate it to them distinctly.
Informing your vendors of both your present situation and future forecast would ensure that everyone is on the same page as regards the end result. This way, everyone knows what is expected of them and works in line with these goals.
Good Vendor Collaboration
When you collaborate, you take your vendors as partners, rather than as employees. This way, rather than abide strictly to your limited plans, they are able to take your expectations, brainstorm, and come up with advanced ideas to help achieve your goals in a quicker and better way.
By collaborating, you are not only maximising the amount of value your vendors can offer, but are also ensuring that vendor-related risks are reduced substantially. Also, collaboration between you and your vendors helps you to forge a valuable, long-lasting relationship.
Set Realistic Deadlines
Setting deadlines that are non-realistic would not only place unnecessary pressure on your vendors, thereby impeding their performance and value production, but would also considerably increase vendor related risks and disrupt whatever work relationship you have got going on.
Therefore, it is important to consider the operations of the market of each service rendered and set timelines that are realistic and convenient.
Make Use of Key Performance Indicators
Key Performance Indicators (KPIs) are a way of assessing different facets of vendor performance to ensure that service delivery is in line with set expectations. KPIs are important to determine a vendor’s ability to fill orders accurately and promptly, provide services of high quality and work within the terms and conditions of your contract.
Here are some KPIs you could appraise your vendors’ performances:
- Risk assessment
- Cost savings
- Expansion and innovation
- Customer service
Vendor-Related Risks Assessment
This is one very important practice in vendor management. There are quite a number of risks associated with managing vendors, such as data security, operational, compliance, reputational, etc. All of these risks should be noted, as well as your level of risk appetite, as this will determine how much impact these risks have on you.
Finally, possible solutions should be provided in the case that they arise. For example, for financial risks, you could have your Real Estate Accountant draw up a document that protects the interest of all parties involved.
Benefits of Efficient Vendor Management in Real Estate
Below are a number of benefits that proper vendor management provides:
Better vendor selection
Real Estate Finance is a very important aspect of real estate management that has to do with funding. If you have a good vendor management scheme in place, it would help you reach out to a larger number of vendors providing the same service that you could select from, which ultimately ensures that you make the best choice in terms of cost of service and quality of service provided.
Better Vendor Relationship
In real estate deals, there are usually several different services needed, which results in a need for more than one vendor at a time. Eventually, it might get a tad bit difficult to manage all of these vendors and maintain a healthy fruitful relationship with them.
However, if you have a good vendor management system in place, it would ensure that you have all necessary vendor-related information in a single place, thereby making for easy and prompt access to any information you need.
This prevents any mix ups that might occur and ensures that you are always up to date, and on the same page with all your vendors.
Better Contract Supervision
The lack of an efficient vendor management system in your real estate acquisition process could lead to problems in documentation, management of contracts and service delivery. Hence, proper vendor management not only saves you time, but also energy and money. Also, it helps considerably with your Real Estate Bookkeeping.
Better Performance Gauging
Proper monitoring of the performance of your vendors helps you to have a clear idea of who/what is working excellently and vice versa. This monitoring, however, can only be achieved through an efficient vendor management system.
The need for an efficient vendor management system in any real estate deal -sales, leasing, management and development- cannot be overemphasized.
Putting into practice the above listed tips would increase your chances of having a less-complicated and easy to operate vendor management system.