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The Value of Vendor Recognition Programs

written by: Vikas Vij•edited by: Jean Scheid•updated: 4/1/2011

Looking to consolidate relationships with your suppliers? Vendor recognition programs should be a crucial part of your strategy to achieve this goal. Find out the true value of these vendor programs and how they can help your organization.

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    Importance of Vendors for the Business

    Supplier Support Many businesses are dependent on a network of vendors for the supply of crucial components or products. The supply chain in such businesses can be as important as the sales and distribution chain. Success of the business can depend on the quality and performance of the vendors in such cases. Therefore, it is always a good idea for a company to have innovative vendor recognition programs in order to recognize their achievements and reward them for their exceptional performance and services. There are several key benefits of such programs that make them valuable for a business organization.

    Photo Credit: svilen001

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    Motivate Vendors to Perform Better

    Effective programs that recognize and reward the vendors for their performance can motivate them to continue to excel in terms of their quality, pricing and delivery commitments. In a highly competitive business environment, strong and motivated vendors can be a crucial competitive advantage for a business. Therefore, the organization must take care to develop and nurture its vendor network with innovative recognition and reward schemes.

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    Help to Improve Vendor Loyalty and Commitment

    In today’s competitive world, vendor loyalty cannot be taken for granted. Reputed vendors are always in demand from a number of competitors, and their supply capacity is limited. Therefore, the business organization needs to ensure that it continues to receive privileged support from its key vendors. Vendor support is important to ensure that customer delivery commitments are maintained. When there is a peak demand for the company’s product, it may fail to exploit the market opportunity fully if it does not have adequate vendor support to meet that demand in the peak season.

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    Encourage Vendors to Adapt to the Company’s Culture

    If the company treats its vendors as a part of the family and engages in vendor recognition programs periodically, it can help to bring the vendors closer to the corporate values, ethics and principles of the company. They tend to identify themselves with the values and policies of the organization, and adapt to its culture more easily. This helps to consolidate the relationships with vendors for the long run. It also fosters a better understanding of each other’s needs and creates a win-win situation for both parties.

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    Helps to Create Entry Barriers for Competitors

    Strong and mutually rewarding relationships with vendors can lead to the creation of stiffer entry barriers for new competitors. If the vendors trust the company, they may like to sign up deals of exclusivity with the company for certain crucial components. The company can give them a buyback assurance for their entire production capacity. In such a situation, it becomes difficult for too many competitors to enter the business if they do not have access to critical supply sources.

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    Encourages Vendor Participation in Product Innovation

    Recognition to vendors also brings about their enthusiasm to work closely with the company on new product development. A number of products require a close interaction and cooperation between the company and the vendors during the development stages. Involvement of vendors from an early stage helps to achieve the lowest costing and minimizes quality issues in the long run. Therefore, recognition of the value that a vendor can bring to an organization is important to achieve the overall organizational objectives.

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    Influx Connect "A Robust Supplier Incentive Program" retrieved at: