Your Guide To Vendor Management System on Amazon

A Vendor management system acts as a single point of control for all vendor-related activities, helping merchants manage them seamlessly. It aims to minimize problems that could affect your eCommerce business, improve its efficiency, and drive long-term growth with high ROI. 

Whether you’re a seller looking to improve your vendor management process or you’re an Amazon Vendor (a first-party seller from whom Amazon is buying goods to sell to the consumers), you need to incorporate a vendor management system as a part of your selling strategy. Read on to know why it is necessary, the processes it involves, and various steps it needs to set up one that improves your business performance, along with giving other benefits. 

The Need To Have A Vendor Management System

Since vendors supply the goods sold on any eCommerce platform, all related activities need to be monitored and metrics tracked. It helps ensure that those items are delivered to the right palace, at the right time, in the right quantity, and for the right price so that Amazon listing assistant can confidently go ahead with their job. Below are more reasons one should have an amazon vendor management system.

Onboarding Speed Increase

Customers turn to Amazon to get their products quickly. They don’t want to be kept waiting with shipping delays. This is possible only if the seller or Amazon has sufficient stock to meet the demand. Onboarding a vendor who can consistently deliver the required quantity of products without compromise in quality or other factors is vital to optimizing your sourcing process. A VMS lets you gather all information about a vendor in one place, aiding quick onboarding. 

Cost Savings

Selling on or to Amazon is a careful balancing act between avoiding high procurement/selling costs and ensuring that you gain enough profit. Saving as much as possible on your initial and operational costs can help manage this balancing act a lot. The efficiency gains brought about by utilizing a VMS can help with your Amazon product listing optimization services in cutting down on unwanted expenses. It even helps reduce administrative costs due to the reduced workforce requirement and increased operational efficiency. 

Easier Risk Management

Risks may be inherent to selling online but it doesn't mean you have to always be at their mercy. With the right strategy and use of a VMS, you can minimize their impact on your business. The presence of multiple tools and lots of data on the VMS can help you create a bespoke business strategy that mitigates a variety of risks associated with cybersecurity, compliance, finance, brand reputation, and operations.

Accurate Logistics Tracking

Timely movement of goods across vendor, seller, and Amazon's warehouses for shipping purposes is the lifeblood of an eCommerce business on its platform. Without it, you will face shipping delays and loss of customer trust in your business. But tracking the movement of product packages from the factory floor to the products’ final destinations is no easy task. 

Having a VMS lets you track every parcel with pinpoint accuracy until it reaches the intended destination. The data can also be automatically logged after confirmation from the other end, making it easy for your Amazon Product Listing Services provider to make pages go live confidently. 

Improved Brand Value and Business Relationships

Reliability is what a seller needs from their vendors, and a VMS helps on that front by consolidating all relevant information. With this certainty comes confident selling of products, in turn enhancing the seller’s and Amazon’s brand value. This increase comes back to the vendor and increases their brand value as well. 

The subsequent positive feedback loop up and down the sales chain builds better working relationships between all parties involved over time. The eased communication and process management again makes logistics seamless and efficient, improving the entire operation’s condition. 

Vendor Management System Processes

Vendor Management is a complex undertaking containing many moving parts that must work in sync to keep the business flowing. This complexity and importance mean the creation of such a system should involve meticulous planning and execution at every step. 

Since every niche present on Amazon needs a VMS with varied characteristics, it is not possible to have a one-size-fits-all approach to its creation. But some steps are similar across the board and must be adhered to by all VMS creation processes. 

Affirm Business Goals

No business can function and grow without practically achievable goals set early on. While they may see some alteration with changing market conditions over time, the core tenets should remain steadfast to act as a guide to the business’s overall functioning. 

In the case of Amazon eStore business, it is important to account for vendors too. Your business goals should be in place before the start of the VMS process. They are necessary to prevent effort duplication and enable effective vendor performance evaluation. 

Select A Suitable Vendor

Just any vendor won’t do; you must choose one that works for your business based on certain criteria. The factors that should meet your expectations include their experience, fulfillment capability, production resources, proven history of performance, scalability, product lineup, etc. 

Once done, you should establish a strong working relationship with them and make long-term deals to get the required supplies. If you’re a vendor selling to Amazon itself, then you should ask for all relevant expectations they have from a vendor before you sign a supply contract. 

Build The Applicable Vendor Management System

Once you’ve confirmed your business goals and selected a suitable vendor, you should proceed with building the VMS. You can either do this by hiring/designating a dedicated team or by outsourcing it. They will be responsible for all of its activities like ordering products, checking vendor performance, payment processing, recording, etc. 

Ensure Goal Achievement and Stakeholder Involvement

The relationship you have as a seller with your vendors, and with Amazon, if you're a vendor, is kept strong by ensuring that all agreed-upon goals are met on time. Steady and clear communication between the parties involved is a must to accomplish it. The tools necessary for communication and other activities should be shared as well to help coordinate better. 

Also, all relevant stakeholders of your organization should be involved in this entire process. This ensures that there's a decision conflict at any point due to one or more applicable persons not being aware of what’s happening. 

The Stages Of A VMS Creation

The many stages of a VMS creation are as follows:

1. Forward Your Goals and Priorities

Once you’ve set your business goals, share them with your vendors. It will help them assess your requirements and begin the necessary communications. This is vital for your vendor management strategy as it helps vendors better predict your order fulfillment needs. They can then self-assess to check if they can meet that demand and what changes they should make to keep up if they are not there. 

If you’re a vendor, ask for Amazon's goals and priorities in detail and determine what they are looking to get out of you. It will help you get an idea of your standing concerning their demands. 

2. Select Your Vendor

Shortlist a few candidate vendors for your order fulfillment needs who can do it with minimal risk and low costs. Meet with your potential vendors and hear out their concerns. If you find that you are comfortable with what they can bring to the table, then you can go with onboarding them. 

If you’re a vendor getting assessed by Amazon for hiring, meet with a representative from the company and discuss all relevant factors before agreeing to become their vendor. 

3. Negotiate a Mutually-Agreeable Contract

Once confirmed, negotiate with your chosen vendor about the particulars of your business relationship. Ask about their business objectives to know if they match yours. Reach a middle ground that all parties can agree upon where the vendor doesn't feel stressed to deliver on time and speed requirements at the cost of quality and prices. Create a few contract drafts and share them with vendors before signing on the final version after changes have been made to it that satisfy everyone. 

If you’re a vendor dealing directly with Amazon, then you should put forth your concerns to them clearly and ask for contract customization if needed. Only sign it after you’re satisfied with its terms and conditions. 

4. Get The Appropriate Tools

A complex task like vendor management requires the right technological tools to get accomplished. Select the right software and hardware in the market after assessing your requirements and their prices. It’s best to go with cloud services as on-site systems are prone to security and other issues. 

Better still, outsource the VMS tasks to a professional agency that has the necessary infrastructure in place. Outsourcing is also applicable if you're a vendor dealing with Amazon. You may get a discount for using their AWS cloud facility. 

5. Track Relevant KPIs and Communicate Regularly

Keep the lines of communication with your vendors open at all times. Schedule meetings regularly to determine present status and future courses. Use the relevant tools to track all applicable KPIs and provide the reports of their data analysis to vendors during communications. 

Have troubleshooting mechanisms in place to handle untoward situations. As a vendor yourself, ask for similar reports from Amazon regularly and question any gaps you may have in your communication. 

In Conclusion

Vendor management is a critical factor in keeping your customers happy with the timely fulfillment of quality products. It even helps ancillary tasks like Amazon PPC services since product listings can get done with confirmation of quantity, price, and other influential factors necessary to rank high. Continue to keep up with the negotiated terms and conditions of the contract with a solid VMS and you will have a thriving online business with a reputed brand.