Managing Vendor Relationships

Managing Vendor Relationships Pamela Hale, CPhT, BBA

Program Objectives • Outline a process for managing vendor relationships in the pharmacy • Explain the process of communicating your priorities with your vendors • List steps to create competition among your vendors

What do you expect from your sales rep?

Sales Reps Provide • Better products and methods • Clinical information • Product sourcing • Market information • Solutions to problems • Savings • Remember Reps are important to your success

PROACTIVE Accessible Inquisitive Forthright and candid Even-handed, fair Champion for change Managing sales process REACTIVE Inaccessible Uninterested in products, services or technology Have favorites Leave change to clinicians and physicians Sales reps are uncontrolled Which way do you deal with sales reps?

Managing the Sales Process • Be Inquisitive – learn • YOU map the course of action • YOU advocate when beneficial to the hospital • Restrict access to staff and physicians before the determination of benefits of the product

Determine the Benefit • Could the product/service save money? • Could the product improve patient care of their outcomes? • Does the sale’s rep product support your GPO commitments? • Do you have the necessary comparative data? Is this data valid? • What is the best way to champion this product to others?

Communicate with your Rep • Impose yourself as the Point Person • Promptly return phone call, e-mails • Be candid – yet cautious • Inform them of progress and problems

Rep misrepresentations • “Your staff likes…”, “Dr. Healer wants …” • “We have/ will have your GPO contract” • “Your GPO treated my company unfairly” • “Your supplier has problems” • “Clinical studies find my product …” • “All other hospitals have converted.” • “You will save 50%” • Going over or around you • Starting with CEO or CFO • Selling to end users • Courting physicians

Discrediting the competition Recalls, bankrupt, production problems They can’t deliver They were thrown out of Getwell Hospital Discrediting YOU (the buyer) Buyer doesn't like me You’re in ABX’s hip pocket Your buyer isn’t fair _____ is on their payroll The buyer us planning on substituting their product, for mine Rep misrepresentations

Defusing misrepresentations • Be accessible and forthcoming to vendors and internal customers. • Perform accurate and timely analysis • Place the hospital’s interests first • Remain impartial at all times – maintain a level playing field • Share success – give credit to others

Buyer’s Objectives • To represent their hospital to the business community • To lead the hospital’s cost containment program • To search for products and services that improve your value • To support the hospital and GPO contracts and commitments

Rep’s Objectives • To represent their company’s business and the professional community • Sell their product or service for the maximum return to their company • To introduce new products that have greater profit margins than current ones • Meet or exceed sales plans and quotas • Support GPO agreements if they have them – circumvent, if they do not

When the two objectives conflict? • Product choices • Price and terms • Contract compliance • EDI or manual purchase orders • Fill rates and invoices Regardless, relations should be cordial and professional

Don’t be afraid to share your priorities with a vendor • If a vendor can help, they will find a way to get you the best solution. • If they can’t help, let them no they are not part of your priorities but continue to share with them your needs and how they may be able to help you down the road.

Create a competitive environment • Vendors that know they have secured your business are better able to seize control of the negotiations. Be wary of "partnerships." They are vendor's way of making sure you are going to use them.

Use vendors to help build a business case • Vendors often have white papers and ROI analyses that can help you build a business case and are very willing to help persuade your team. Using them to help you build support also helps them understand your business and refine their proposal so it better meets your needs. In the best cases, you become partners where success makes both parties look good

Treat potential vendors as partners • There is a real need to drive contract terms and legal conditions, but in the end, no contract in the world will adequately cover your long-term goals and expectations. Build a solid, true collaborative partnership with your vendors. It will pay off in the long run. When things go bad, and they most certainly will, who would you rather have at the table? A vendor or a partner?

Find a way to build relationships • Price isn't the only aspect of the relationship. Find creative ways to go beyond the transaction. At the university, we involve vendors with the students via executive speaking events, scholarships, internships and recruitment. Further, the faculty seek sponsored research with the vendor. We have a person who works to manage all aspects of these relationships so dealing with the University of Miami is pleasant and easy to achieve.

Ask for ongoing responsibility • To be a partner, both parties must act like partners, which means helping each other beyond the cash exchange. Will the vendor continue to help you succeed after the sale? How and where have they done this before? What can you do to help them be successful beyond just buying their products? If they cannot think of ways for you to help them, then the only value they will get is money, and this means you will spend more for their products or services.

Always get competitive bids • From the outset, be clear that they have to put their best price on the table. No one will get a second chance to rebid. And never, ever give one vendor's bid to another to beat.

Be respectful of your vendors • If you have no intention of giving them your business, don't ask them to participate.

Negotiate with the top two • After evaluating a number of vendors, conduct contract negotiations with the final two, not just the final one. That enhances competition, and you may discover a deal-breaker with the top choice.

See the other side • Make sure you understand the value at the other side of the table of each negotiation point. Sometimes you'll learn that something you find of minimal value is of major value to the vendor, and often this learning comes away from the negotiating table.

Make it a win-win • I have found that when vendors commit to a result rather than a sale, their success is directly tied to my organization's success. It's not just about selling me the best product, or about a vendor getting the best margin. It's about two organizations getting into a collaborative and mutually beneficial business outcome.

Offer to help • If you don't buy from the vendor, help them build relationships with the people you know that may face the issues their products address. This also builds the relationship without a transaction involved. When you go to negotiate with them, they will be more amenable because of all the help you have provided in the past.

Dollars and cents • Don't pay for features you won't use. Offer to pay for them later, if and when you grow into them. • Start by defining what the "best deal" means. There are business objectives associated with every technology-related acquisition. There are lots of techniques for driving toward lowest cost, but you need other approaches when the requirements involve tight time frames, continued support or total value. In most cases, metrics with contractual remedies should be included to be sure the goals are clear and measurable and that the deal was, in fact, the right one.

Dollars and cents • Tie guarantees to money. Guarantees aren't worth anything unless there are monetary penalties. They must be spelled out in the contract. • Focus on value, not price. Before a negotiation, determine what is of value to your firm -- for example, the successful implementation of the system, with users gaining 20% improvement in time reductions. Use this value analysis to drive the discussions with the vendor -- can they deliver this value and then align their price to this? • Demand proof of concept. If you are seeking value, then you need to see it firsthand. So make the vendor prove it can be done, hopefully by implementing something at your location with your people and data. Often this works with appliance-type systems or infrastructure. If the situation is for something more complex, then you must meet with users of the firm's products and really do due diligence to see if they are getting the values you seek.

QUESTIONS?

Managing Vendor Relationships