Whether it’s called a “vendor code” or a “supplier code”, congratulations are in order if you are one of numerous suppliers who possess one assigned to you by the client with the intent of buying your products. It’s important to remember that although having a vendor code is the key to receiving that first purchase order, it’s NOT a guarantee that you’ll continue receiving them in the future. As a supplier to any client you must continue to EARN your vendor code every day you do business with them. By that, I mean you must continue to provide whatever compelled the client to award you a vendor code in the first place. Whether it was product capability, customer service, cost savings or industry respect, you must keep up the energy, the actions and the discipline that enabled you to receive that code from the beginning . . . or stand a chance to lose it.
I’ve been involved with so many suppliers who busted their butt in order to be honored with a vendor code . . . only to have that same supplier eventually lose their enthusiasm, ignore requests and provide quotes that were either non-competitive or didn’t meet technical requirements. Having a vendor code doesn’t mean you can relax. Quite the opposite. Having a vendor code means you must work harder than ever to continue to ensure your capabilities, communication, project management, sales representation and product value meets or exceeds the client’s expectations.
A vendor code is not a passport to the client’s projects. Rather, it’s recognition by the client that you are a preferred supplier capable of providing products and services to support their programs. Not every supplier who has a vendor code is guaranteed they will be asked to quote. Nor should suppliers WITHOUT a vendor code be barred from quoting. The capability of a supplier’s products and services should determine who will be asked to quote . . . and NOT whether or not the supplier has a vendor code.
SALES ADVICE FROM THE BUYERS DESK: If you ever encounter a Buyer who tells you, “You’re not allowed to quote or receive a purchase order because you don’t have a vendor code”, you need to prudently and tactfully remind him of three things: Number 1: No supplier was every “born” with a vendor code. Every supplier that the Buyer deals with, at some point in time, had to be bestowed one. And they received their code either because the Buyer saw a need for their product or because the supplier convinced the Buyer there was a need. Number 2: If suppliers who do not have vendor codes are not allowed to quote, how will the Buyer fulfill his responsibility of knowing what suppliers are out there, what they can provide and how they can assist the Buyer’s company to reach its goals? It’s part of the Buyer’s job to research and qualify new companies capable of providing the best product at the best value that best fits their needs. Suppliers selling current product can run the risk of going out of business. And if the Buyer doesn’t have a qualified backup, he himself runs the risk of shutting down production. If you don’t have a vendor code or if the Buyer isn’t willing to provide one to you at this time, waiting in the wings for a supplier to close its doors or upset the Buyer enough to lose their own code can be your consolation prize. Number 3: If suppliers who do not have a vendor code are not allowed to quote, how will the Buyer really know he got the best product at the best value that best fits his needs? This is especially true if the Buyer continues to quote the same suppliers over and over again. In an economically poor business environment in which suppliers are closing their doors, putting one’s eggs in one basket is not a wise decision to make for any Buyer!
So the question remains, why do some Buyers make it nearly impossible to get a vendor code? The fact is some companies actually hand out vendor codes like candy at Halloween. But in most cases it seems to take a miracle for a supplier to receive one. So why is that??? First of all, it makes perfect business sense for clients to be picky about giving out vendor codes. In your private life would you just let anyone repair your home or car? Or would you prefer it be someone you’ve pre-qualified? If every supplier who could do business with me would receive a vendor code simply by asking for one, I would be creating vendor codes 40 hours week!
This leads us to the second reason why Buyers are stingy about handing out vendor codes: It costs their employer money! Before a vendor code is created and given to a supplier, commercial, financial, quality and technical reviews must be completed. This takes time, energy and money. Depending on how in depth these reviews are, it can involve numerous people and cost the client thousands of dollars for every new vendor code created. It also takes time and money to maintain the supplier list. That’s why one of the yearly goals of a Buyer is supplier reduction. In fact, some Buyers are rated during their yearly review as to how many suppliers they can logically get rid of. In most companies a dollar figure is associated with the reduction of one supplier. And a yearly supply base reduction of 10% is not uncommon in most Purchasing departments.
I’ve dealt with numerous Sales Professionals who have told me, “I can save you a lot of money. Why can’t I get a vendor code?” There are times when it makes perfect sense to create a new vendor code for a supplier, yet it STILL takes an act of Congress to make it happen. That’s due in large to the paperwork, approvals and bureaucracy that some Buyers have to go through to get a new code created. I shouldn’t be telling you this but some Buyers would rather NOT go through the effort of creating a new vendor code simply because of the amount of work it takes!
Here’s another reason why a supplier might not receive a vendor code even if it means saving money: Let’s say I’ve been buying a specific product from “Supplier A” for some time. But all Supplier A has been doing is to buy the product from “Supplier B”, mark-up the product and re-sell it to me at a profit. It would perfect sense for me to simply give “Supplier B” a vendor code and buy direct from them. But depending on how much money I can save my company will depend on how critical I think it’s worth going through the trouble of getting them a code. Let’s say that I could save my company $50,000 a year by getting a code for Supplier B. To some client companies $50K is not a good enough reason to create a new vendor code, especially if their revenue is in the hundreds of millions. Why? Because to some companies, saving $50K is like you going out of your way to save a nickel; it just may not seem worth the time and effort!
Another factor to consider is that the Buyer may not have the authority alone to create a new vendor code for a supplier. That final decision most likely has to be made by the senior purchasing manager or director who, depending on their own goals and agendas, may not be willing to do so. As stated earlier, most client companies are actually in the process of reducing the number of suppliers they conduct business with based on corporate goals set by executive management. And when it comes to executive management, sometimes corporate goals takes precedence over what’s in the best interest of the company.
So from the Buyer’s perspective, here are the best ways to convince Purchasing to consider you for a vendor code: #1. Let the Buyer know of your technical capabilities and product lead times. Suppliers are going out of business everyday. Let the Buyer know how you would be able to backup specific products if their current source no longer can. #2. Give the Buyer some estimated costs of products so he can do a quick comparison against his current suppliers. If the savings justify having a new vendor code created he may show some interest. #3. Ask the Buyer if he is able to share his supplier-reduction goal with you. See if you are able to provide a number of products and services he’s currently buying from several other suppliers. Buying five products from one supplier instead five separate suppliers provides supplier-reduction opportunities for the Buyer. #4. Find out if any of your current clients buy your products and resell them to another potential customer, even as a sub-component of their end product. If so you may be able to convince the potential customer Buyer to purchase direct from you, thereby cutting out the middleman and saving him money. #5. Finally, ask the Buyer what it takes to get a vendor code. How easy is it? How difficult is it? What is the process? Who are the decision makers? I’ve never had a Sales Professional ask me that! Too bad. At least with that information you’ll know what you’re up against.