Many start-ups have had experience with vendors walking away from a relationship, leaving your venture high and dry with unfinished work or supplies. This highlights the need for a diversified vendor base. If possible, it will always help to have multiple vendors sourcing your needs. While this poses logistical and administrative problems the benefits are worth the effort. Not only will diversifying your vendor base minimize your exposure if a vendor is lost, it will also force all parties to be more competitive, as you can openly compare performance across the vendor base. If one vendor has quality that is not up to your standards, openly compare their work to another provider and use this comparison as leverage to improve performance or end the relationship.
Ultimately, as with any relationship, you get what you pay for. If you’re looking to use the cheapest vendor, they will likely produce the cheapest materials or the cheapest labor. In the end this could do more harm than good.
Try This: Have a redundancy plan in place in regards to your vendor network. If only a single supplier can source your needs, be aware of other options, should the situation have cause for a change. If multiple parties can source your needs, find ways to integrate these multiple parties into your procurement system. Should a problem occur, this back-up system will ensure a continuation of service.
Avoid This: Don’t be too aggressive when comparing performance across your vendor base. While you should track this information internally and share it on a high level, being too aggressive in comparing two companies can lead to ill will.