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PURCHASING & LEASING

Don’t put your vendor contracts on auto-pilot

It’s easy, to say nothing of convenient, to get comfortable with business relationships and not to question what the vendors are doing. But in the meantime those vendors have every ability to slip in added costs the administrator does not notice.

Don’t just renew vendor contracts automatically.

The firm can often save money and get better service by putting those contracts out for bid. At the very least, bidding keeps the current vendors honest and on their toes.

How to write the RFP

An effective request for proposals has several elements. Begin by explaining what the firm wants – proposals for supplying office products, for example.

Then give information about the firm – its location, size, and the general quantity of traditional orders. The vendors need to know if they are capable of providing the service requested, or, conversely, if the business is too small to warrant a response.

Then list the office’s most frequently ordered supplies, the quantity, the ordering frequency and the current prices for those items. Set out the information in spreadsheet form and have the bidders fill in their pricing. That way, it’s easy to compare bids.

And beyond the prices ask for this information:

-At what point do quantity prices breaks begin?

-How often do you offer specials?

-What makes your company different from other companies that offer similar products?

-Please give us any additional ordering and pricing information you believe is pertinent.

Find out about the company too. Ask for a brief history, how long it has been in business, the number of employees, its customer service procedures and who the account representative will be. Also ask for customer references.

End with a response deadline and the name of the contact person.

References even for the RFPs

Send the RFPs to the current vendor and to at least two others. But don’t just choose the other vendors at random. Instead, choose companies the firm may well want to do business with. To find them, ask other administrators what companies they use and whether they are happy with the service they get. Also ask who the sales representatives are and how well they perform.

Any vendor that gets a positive recommendation warrants an RFP. That’s a vendor somebody already trusts.

Evaluation goes beyond price

How should the firm evaluate its current vendors?

Don’t rely solely on price. Even the lowest prices aren’t enough to keep a vendor on board if other requirements are not met.

One is service. A rule to consider is three strikes and the vendor is out. The third time the administrator meets service frustrations is the time to start looking for another vendor. That is enough to indicate things won’t improve and will likely get worse.

To reduce the possibility of frustration, get all the service requirements, including time frames, in writing. That is obvious for vendors who supply, say computer services that call for a repair response within a certain number of hours. But it is equally necessary even for the coffee vendor. It may not seem an issue that the coffee supplies sometimes arrive a day late – until the partners are meeting with clients and don’t have any coffee to offer them.

Another element to consider is whether the sales representative keeps the firm updated on less expensive products and manufacturers.

The firm shouldn’t have to ask for that. The vendor should be an expert in the field and should be continuously updating the administrator on new trends and new products. That is especially important with computer vendors because the firm needs to know when software is growing obsolete or service on software is becoming difficult to provide.

The vendor should also be offering recommendations on how to build on what the firm already has, such as, “I know you are getting close to budget time, so I want to talk with you about a software program that will improve your efficiency.”

Similarly, a furniture vendor should be offering recommendations on different manufacturers or new fabrics or options for buying used furniture that will give the firm the better value for its money.

Another point to watch for is turnover among the sales representatives. If there is a revolving door for those representatives, the administrator will never get a chance to develop a relationship with that vendor.

The intangibles of trust and relationship are also important in a vendor, so don’t overlook these qualities.


Related reading:

Use long-term vendor contacts to win long-term savings


How to make 2015 the year you improve value, cut costs, and increase profits


Boost quarterly profits with this proven 6-pronged cost-cutting plan


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