The Hidden Costs of Vendor Errors
Many vendors believe that getting it right with the customer on the first job firmly establishes their position as “experts.” And, in fact, most of them do get it right—the first time. Why do so many fail to maintain that level of accuracy and service?
Although much of the challenge to getting all the elements right is within the control of the vendor, their performance declines over time. They fail to consider what we like to call “wild card elements” that can impact results.
Here’s the typical scenario:
- You place an order for training manuals with your new vendor.
- The new vendor pays special attention to your order, ensuring everything is perfect.
- You are delighted and proclaim the vendor the best you’ve ever worked with.
- You place your next order for training manuals with a new section added and new ship to location.
- The new vendor takes a day to confirm your order and then passes you along to his assistant. The order is shipped to the right place but the new section is missing.
- Your instructor finds the error and reports it, but it’s too late—class is in session and the damage to your reputation is done.
Is this starting to sound familiar? The problem isn’t that the vendor is necessarily bad. It’s just that they have not instituted the quality control processes necessary to ensure complete accuracy the first time and every time.
While these kinds of vendor failures are not uncommon, it is important to recognize the hidden costs of taking corrective action. Considering that budgets are tighter than ever, the cost of vendor error goes far beyond simply replacing and reshipping. Three major hidden costs include:
Hidden Cost No. 1: Managing the vendor
Companies typically underestimate the cost of people involved in identifying and solving vendor problems. In fact, vendor invoice errors alone can erode any expected savings from selecting a low cost bidder, sometimes as much as two to 10 percent each month.
Identifying typical vendor errors and screening replacement vendors for a demonstrated ability to accurately provide product and services can weed out some poor performers. Invest the time to check references, meet with vendor management, and learn what established quality control processes are in place to ensure accuracy.
Hidden Cost No. 2: Poor change order communications
Change communication to vendors can be complex and burdensome. Who do you communicate an order change to? How are you assured that everyone in the vendor organization got the message? What safeguards are in place to guarantee your order, with changes, will be shipped on time and to the right location?
Your vendor should have in place a system of checks and balances to ensure accuracy. An ability to quickly adapt to your requested change with ease is essential. But more importantly, they must have a seamless and streamlined communication chain that relays order changes down the production line. A single point of contact is all it should take to assure your order changes have been received, understood, and will not impact timelines.
Hidden Cost No. 3: Shadow organizations
Shadow organizations—those employees in your organization who continue doing things the old way—almost always exist when vendor errors cause lack of confidence. Left unchecked, redundancies created by shadow organizations can greatly reduce the value of outsourcing your production and fulfillment.
As part of managing vendor relations, introduce all employees involved to their vendor contact right away to establish trusted relationships. Educate your organization on why it’s important to use the new vendor’s services and what quality control processes the vendor has in place that they can rely on. Your vendor will gain trust by repeated accurate performance and your employees will learn to let go.
Read the Red Hat Case Study and learn how we were able to provide $156,000 in shipping savings alone in the first year.
Zebra Print Solutions’ services are uniquely suited for education and training departments that require error-free production and fulfillment of materials for classes, courses, and training sessions. The quality control processes and advanced technology we deploy provide our clients with a 99.5% accuracy rating.
In addition, we offer fully automated training material efulfillment with a direct interface to your Learning Management Systems (LMS) and/or registration system. Our advanced technical experience working with many training registration systems provides a complete and seamless solution.