The Hard Task of Changing Vendors

November 30, 2020


High quality products and services are crucial to the success of your company, so when vendor relationships aren't working, it's often best to make a switch as soon as possible.

Whether it's due to underperformance or a change in business priorities, changing vendors is a difficult, but necessary part of successful business operations. Yet many companies hang on to underperforming vendors for far too long out of fear a lengthy sourcing process or intensive due diligence that's required to onboard a replacement. While finding a new vendor might be time consuming and expensive in the short term, in many cases, it can cheaper than paying a vendor for products or services that are not helping your business.

Knowing the best practices and being comfortable with sourcing and vendor management can give business leaders more confidence when it comes to changing suppliers. If you're considering changing vendors, let these tips guide you through the process:

Define Your Strategy

Before making any moves, it's important to sit down and define your strategy related to the products or services the vendor is providing. Conduct a post-mortem or a project retrospective to determine what went wrong or why the supplier has been meeting expectations. Write down the factors that has led you to this point. Was it underperformance, poor customer service, or pricing? Is it a change in your overall business strategy?

By making sure you're 100 percent clear on why you're switching vendors, you'll be better prepared to communicate your expectations to your current vendor, your future vendor, and all internal stakeholders. You'll also be less likely to repeat future mistakes in the future.

Create a list of the non-negotiable criteria that will be used to select a new vendor. Make sure to define your budget, requirements, and expectations upfront, as this will help streamline your search process.

Terminate Your Existing Contract

Prior to notifying your vendor, make sure you consult with your legal team and thoroughly understand the terms of your contract. If your agreement has a termination for convenience clause, then you're within your legal right to end the relationship. However, make sure you understand contractual requirements -- are there termination penalties or notice periods? It's best to consult with your legal counsel before making a decision and informing the vendor. Then, have your legal team send contract termination notice.

Begin Your Search

Kickoff your search for a new vendor by conducting some market research into the product or service you need fulfilled. The point is to gain a comprehensive view of the industry landscape, so you can pick the vendor that meets your business needs. Create a list of the top suppliers in the industry and try to write down what you like and dislike about each one. It may help to consider which vendors or suppliers your competitors are using, or ask for recommendations from others in your industry

Start The RFP Process

Once identified a short list of potential vendors, it's time to create a request for proposal (RFP). A well-written, detailed RFP will hep service providers understand exactly what you're looking for. It'll also help them prepare to demonstrate that they're products or services can meet your needs.

Remember, it's important to engage all of your company's stakeholders in the creation of an RFP. Below is a brief summary of the steps involved in a typical RFP process.

  1. Work with internal teams to gather your project, product, or service requirements.
  2. Define your vendor selection criteria.
  3. Create your RFP requirements document (there are many free templates online!)
  4. Send the RFP to the vendors on your list (be sure to set a deadline).
  5. Carefully evaluate each submitted proposal.
  6. Schedule finalist meetings with the best candidates.

Select Your New Vendor

After meeting with each potential vendors, it's time to compare notes with other internal team members. Ask each stakeholder to come to the table with what they liked or disliked. Evaluate each vendor against your selection criteria. Be sure to consider each team member's feedback when making your final decision.

Once you select your new vendor, you'll need to work closely with your legal teams to draft a contract that satisfies both sides of the deal. Keep in mind, setting clear expectations in your RFP will help the contract negotiation process go as smoothly as possible.

Changing vendors is a necessary part of day-to-day business. While the process can be challenging, you can make it easier by being clear and upfront about your expectations and defining them on paper.

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