Establishing Vendor Alliance Agreements

connect-316638_1280I want to tell you about an exciting new project that I am working on with a client. Together, my client and I are developing an alliance program from the ground up. Like you, he is a smaller company. His company cannot force its vendors into an alliance program or call deep discounts and bad treatment an alliance program. And like you, my client genuinely wants to have profitable, “win-win” relationships with his vendors.

I thought that you might benefit from the lessons we’ve learned putting this program together:

Plan: Set aside time think through all of the aspects of the program. Some issues worth considering are: Term of alliance, nature of alliance, benefits to vendors, benefits to your company, all aspects of confidentiality, benchmarks (for you and for the vendor), outlining your expectations and their expectations from the program.

Generate Buy In From Within: Bring everyone from your company who will work with the vendors into a meeting to discuss various aspects of the program. Many of the people who work with the vendors day in and day out will have keen insights about the vendors and why they might want to join your company in an alliance. They are also the alliance program sales force, so allow them the opportunity to help establish the program.

The most common complaint that I hear from companies that are in vendor alliance programs is that there is a disconnect between the initiating companies’ employees understanding of the program and the stated purpose of the program in formal documentation. In one instance, the alliance program established deep discounts to join. So, when one employee demanded even more price discounts, the employee was seen as strong arming the vendor into bankruptcy. In the end the vendor went around the employee to the head of the alliance program to get the pricing issue resolved.

What’s In It For Them: As much as this program is about your company and how to improve your bottom line, there has to be a clear and compelling reason for vendors to join your company in an alliance. It is your responsibility to clearly define expectations.

Roll It Out Internally and Externally: Once the program has been created, take time to explain it to any employee who might be affected by it. In my client’s case, we also invited the top sales people to the roll out meeting so they could hear about different aspects of the program and ask questions or offer advice before we introduced it to the vendors. Once everyone is on board internally, introduce it to your vendors. The roll out to the vendors may also include some form of training, where the vendors are brought together for a question and answer session and explanation of the benefits.

Legalese: You know that I am a lawyer, so I have to put in my two cents worth. It is more than worth the couple of hundred dollars to have your lawyer look at the agreement. There are valid reasons for not allowing the lawyer to draft the agreement, but at a minimum make sure that you are protected if something should go haywire.

If you or a company you know would like to establish an alliance program, call me. 206-723-3472. I am happy help set up a Vendor Alliance Agreement that is workable, profitable, and easy to administer.