Let’s be honest—vendor management sometimes feels like herding cats. 

You’re not alone if you’ve ever had to chase down a supplier for a late delivery, deal with a sudden price hike, or juggle dozens of contracts across different departments. I’ve worked in procurement and small business operations for over a decade and had my fair share of supplier headaches. 

But here’s the good news: with the right systems, mindset, and consistency, managing vendors can actually become one of the most rewarding parts of running a business. 

In this guide, I’ll explain vendor management in its entirety (without the corporate waffle), explain how to do it well, and explain how to avoid the common traps that cost Aussie businesses time and money. 

What is Vendor Management? 

In simple terms, vendor management is the process of working with suppliers to obtain what you need—on time, at the right price, and with the right quality. 

It’s more than just finding someone cheap to do a job. It’s about building reliable partnerships that support your business goals. 

Whether you’re running a café sourcing fresh produce or managing a construction firm dealing with multiple subcontractors, having a clear vendor management strategy helps you: 

• Avoid last-minute scrambles 

• Reduce costs without sacrificing quality 

• Make smarter, faster decisions 

• Keep your projects running smoothly 

 

Common Questions Aussie Businesses Ask About Vendor Management 

Let’s start by answering the questions I hear most often: 

1. “Do I need a vendor management system?”

If you deal with more than one supplier—or expect to in future—yes. Even a simple spreadsheet is better than winging it. 

2. “Is vendor management just for big companies?”

Not at all. Small businesses often feel the impact of supplier issues even more. A missed delivery can shut down operations for the day. 

3. “How do I deal with a vendor who keeps stuffing up?”

The short answer is to communicate, document everything, and know when to walk away. I’ll discuss this more below. 

The Core of Good Vendor Management: Relationships and Responsibility 

This isn’t just about contracts and price sheets. 

At the heart of strong vendor management are relationships and responsibility. 

I once worked with a local packaging supplier who wasn’t the cheapest, but they bent over backwards when I had a last-minute order. Why? Because we treated them like a partner, not just a transaction. 

 

Here’s what that looks like in practice: 

• Be clear from the start. Spell out expectations in writing, such as delivery times, quality standards, and payment terms. 

• Stick to your word. Pay on time. Communicate delays. It builds trust. 

• Check in regularly. Don’t just call when something goes wrong. Build rapport. 

It’s a two-way street. Good suppliers want to work with businesses that treat them fairly. 

 

The 5 Pillars of Effective Vendor Management 

If you want a system that works and scales, focus on these five areas: 

1. Vendor Selection

Don’t just go with whoever replies first. Do your homework. 

• Get multiple quotes 

• Ask for references 

• Look beyond price—what’s their track record? Do they communicate well? 

• Consider local suppliers (less shipping time, easier relationship-building) 

Pro tip: Create a scorecard with criteria like delivery time, product quality, communication, and pricing. This will make decisions easier and less emotional. 

2. Clear Contracts and Service Agreements

It doesn’t have to be a legal masterpiece, but it does need to be clear. 

Include: 

• Deliverables and timelines 

• Payment terms 

• Return or dispute process 

• Penalties for missed deadlines or poor quality 

This protects both sides. A handshake’s great, but a signed agreement avoids headaches later. 

3. Ongoing Performance Monitoring

Once you’ve chosen a vendor, keep track of their actions. 

• Keep a simple log: did they deliver on time? Was the quality consistent? 

• Use KPIs (Key Performance Indicators) like: 

• Delivery accuracy rate 

• Defect rate 

• Response time 

Even just checking in monthly can prevent small issues from becoming big ones. 

4. Strong Communication

I can’t stress this enough—communicate early, often, and clearly. 

• Let vendors know of changes in demand 

• Share your business timelines and goals 

• Be honest if there’s a problem, but stay respectful 

You’d be surprised how many issues get sorted quickly with a simple phone call. 

5. Risk Management and Backup Plans

What if your main supplier suddenly shuts down? Or does a shipment get stuck at customs? 

Have backups. 

• Identify your most critical suppliers 

• Find at least one alternative source 

• Store emergency stock for vital products 

Planning for the worst means you won’t panic when it happens. 

 

Real Talk: Mistakes I’ve Made (So You Don’t Have To) 

Let me share a couple of stumbles from my early days: 

Mistake 1: Trusting a vendor’s verbal promise over a contract. 

They said they could deliver weekly but didn’t. I had no proof of what was agreed upon. Lesson learned: Get it in writing. 

Mistake 2: Not keeping track of supplier performance. 

We kept using the same vendor even though delays kept happening. Once I started logging their delivery failures, the pattern became obvious. We switched vendors, and things improved immediately. 

 

Tools and Templates That Make Life Easier 

You don’t need fancy software to start. Here are some tools that work great for small businesses: 

• Google Sheets or Excel: For vendor lists, scorecards, and delivery tracking 

• DocuSign or PandaDoc: To get contracts signed digitally 

• Slack or WhatsApp Groups: For quick communication (especially with local vendors) 

• Trello or Asana: To track vendor-related tasks or issues 

Want a free vendor checklist template? Leave a comment below, and I’ll send it your way. 

 

When It’s Time to Say Goodbye 

If a vendor consistently fails to meet your expectations—even after you give clear feedback—it’s okay to move on. 

Look for signs like: 

• Missed deadlines becoming the norm 

• Poor communication 

• Refusing to accept responsibility for mistakes 

It’s not about being ruthless—it’s about protecting your business. You owe it to your team and customers. 

 

How to Keep Your Vendor Management Strategy Fresh 

This isn’t a one-and-done job. Vendor management needs occasional tune-ups. 

Every 3 months: 

• Review performance 

• Check for changes in pricing or product quality 

• Talk with your vendors about plans 

Once a year: 

• Reassess your supplier list 

• Renegotiate contracts 

• Update your risk management plans 

Fresh eyes spot opportunities (and risks) you may have missed. 

Final Thoughts: Keep It Human 

Vendor management is about people. 

Yes, systems matter. Contracts matter. But the human part? That’s what makes it work. Suppliers are more than service providers—they’re part of your business ecosystem. 

When you treat your vendors respectfully, communicate clearly, and hold them accountable (while doing the same for yourself), you build relationships supporting your long-term success. 

So, take a little time this week to review your current vendors. What’s working? What’s not? Where could you be clearer, fairer, or more consistent? 

Your future self—and your bottom line—will thank you. 

Do you have questions or your own vendor war stories to share? Please do so in the comments below. Let’s learn from each other and make vendor management just a little less painful—and a whole lot more effective.