But there’s also potential for a backlash hiding in your reserve of inactive vendors: Duplication of orders, and even fraud.

Good news: Reducing the risk of these isn’t as complicated as you might think. After all, it’s the fear of complexity that’s keeping many Purchasing & Procurement pros from purging their vendor rolls.

The final decision to keep or cut loose an inactive vendor of course lies within your own company, based on your unique standards.

But there are some general guidelines that can help you pave your own path.

For example, one benchmark for jettisoning inactive vendors generally occurs at 15 months; the most common standard is two years.

Here’s a guide to help your decision-making process:

• Gather the facts. Run an audit of your records. Identify vendors you haven’t used for a decided-upon period — say 14 or 15 months.
• Update the records. Sort your inactive vendors into more easily identifiable categories. Based on industry or individual needs, these categories can include: archiving the vendor’s records; removing the vendor’s name from your live master file; creating a designation for inactive vendors in your file, so they’re easily identified.
• Get everyone on board. Share your findings with the other key players in Purchasing & Procurement, and ask for their input. There might be reasons — not always obvious — why specific vendors need to remain in play, despite recent inactivity.

That’s the assessment delivered by a survey of nearly 600 execs: procurement and supply chain pros, CFOs, CEOs and COOs. The research was recently summarized in businessfinancemag.com.

It’s a matter of seeing the glass as half-full, instead of half-empty, you could say.

Either way, you certainly don’t have to worry about being overlooked.

Slightly less than 70% of pros responding to the survey said supplier continuity topped their list of supply chain risk.

That certainly makes it a bit easier for you. Not only are they giving you the opening to flash your stuff, they’re telling you what they want to see.

Suppliers clearly are your target. Here are four areas to aim for:

• Suppliers’ financial stability. Ask suppliers to offer more information about their ongoing economic health. Maybe you could ask them to fill out financial status forms every six months, or even every three months. Do it for everybody and no one will feel like they’re being singled out.
• Smaller vendors. What are you looking for in particular when you examine smaller vendors? Many of these businesses have diversity requirements steering a specific amount of their spending to women- and/or minority-owned companies. The current credit squeeze could make it difficult for your suppliers to honor these commitments.
• Branch out. Be very careful of relying on just one supplier for any critical element of your company’s business. Sole-sourcing can open the door to all kinds of trouble, especially if foreign markets are involved. At least seek out back-up sources, so you’re ready to tap them at a moment’s notice.
• Work together. Now more than ever, both you and suppliers will benefit from a more collaborative arrangement. Need a little extra time because you’re waiting until a customer pays you? Work with your vendor to find a middle ground; you might even offer something in return. Reinforce the idea that you’re part of the team working with suppliers. In the long run, it’s best for all involved.

There are three areas to focus on, concludes Getting Value from Industry Best Practices, from SAP Executive Insight:

• Customer Service
• Supply Chain Responsiveness, and
• Inventory

In terms of delivering top-of-the-line customer service, it’s often at the top of the list for successful companies.

The two pillars of customer service are on-time delivery and proper lead time for order fulfillment.

And there doesn’t have to be a trade-off by sacrificing inventory levels and carrying costs. If communications are timely and hitting on all cylinders, peak performance in customer service and inventory efficiency can be compatible.

It’s a matter of determining and setting up a customer collaboration communication system that best suits your own needs.

For most companies, this means there’s a way to share real-time alerts to events that impact the supply chain — a truck breaks down, your supplier runs late, etc. The better system you have for obtaining this information and then quickly sharing it with affected customers, the better off you’ll be.

This melds into supply chain responsiveness. One of the best ways to beef up your ability to nimbly respond to rapidly changing requests is to collaborate with key vendors to establish Vendor Managed Inventory (VMI).

It then becomes a team effort, instead of disjointed pieces trying to connect.

The final piece of the puzzle is managing your actual inventory.

Once you’re plugged in with the needs of your customers and you’ve provided a mechanism for quickly reacting to those needs, it’s much easier to calculate how much inventory must be on hand.

Taking these calculations, combined with a “what-if-worst-case-scenario” accounting, you should be able to lower the amount of inventory on hand, and reduce your inventory carrying costs.

Why’s that? You didn’t really think you’d escape the fallout from these financial mega-disasters, did you? Of course some of it will trickle down to you.

What to expect: You’ll want to find ways to demonstrate supply chain flexibility and agility, for starters.

One way to do this is working to improve supply chain “visibility” and tactical knowledge, to help close the gap between the time you learn about something with significant impact and when you can actually do something about it.

It’s more critical than ever that you explore and consider all options that are open to you as you make supply chain decisions, because you never know when you might be called upon to suddenly shift gears.

You can also expect more pressure than before to keep a lid on expenses. There’s the possibility that less credit will be available for procurement, which means more judicious planning is essential.

Think you’re running lean now? You might be asked to make it a little leaner. The sooner you prepare for that possible request, the better off you’ll be if it comes.

What you can do:

• Make your move now to talk to your CFO (or similar manager) about what you can do to help — and what you might expect, at the same time.
• Increase transparency in your supply chain processes, so it’ll be easier to make those “turn-on-a-dime” decisions.
• Talk to key vendors and find out if any key changes are in the wind that’ll impact you.

This is another one of those critical times when getting ahead of the curve will help keep you in the driver’s seat — before you get run over.

But what if you had to explain it all to someone tomorrow? Could you make it easy enough for someone to take your seat for a day — and survive without getting hammered from all sides?

That’s why it pays to take a few moments to formally record the routines and procedures that are like second nature for you.

That way, should you need to step away, your operation won’t fall on its face.

The best place to begin: vendors.

Who are you working with? List all the vendors your company has done business with over the past 12 months — the good, the bad and the ugly. Who belongs on the list for future purposes? Who does not? Share this information with higher management, since they might hear some squawks from dropped vendors.

How are they doing now? Set up a simple (emphasis on simple) means of logging and rating vendors’ performance. It should be easy to read, easy to fill in, easy to follow — and should be free of editorial comments. Why? It’s likely there will be times you’ll want to share these records with vendors.

What should you track? The simpler, the better. Focus on:

• Delivery: As requested; late; early
• Prices/terms: As expected; different
• Quality: Good; rejected

All entries should be checked and initialed by the person receiving the shipment.

Other criteria:

Use numbered receiving reports and purchase orders. This makes it easy to detect if one has been overlooked or left out.

Build up a bank of vendor info. Stash vendor catalogs, price lists, printouts from Web sites, brochures, etc., in a common spot, where anyone can find them and refer to them.

Who can sign what? Create an easy-to-read list of who can sign off for different levels of budget purchases. For example, office manager – $500, A/P manager — $1,000, CFO — $2,500, etc.

In 2007, about $1.4 trillion was spent to send goods from one place to another, more than 10% of our country’s Gross Domestic Product (GDP). Historically, logistics costs as a percentage of GDP hit a low of 8.6% in 2003. Since then, transportation and inventory costs have steadily increased.

There are several factors at work in driving up transportation costs. Of course, there’s the price of fuel. But that’s taken an even bigger toll — more 2,000 trucking companies (of five trucks or more) filed for bankruptcy last year. It’s not getting better: More than 900 trucking companies filed for bankruptcy in the first quarter of this year alone.

So how can you turn this grim assessment into an opportunity?

First, it’s a good time to re-assess some of your Purchasing decisions. Maybe there’s a vendor you use already for one product, and you go to a second vendor for another product because he under-cut the first vendor.

How much money are you saving by buying from the second vendor? Could you purchase the same goods from the first vendor, at a slightly higher price, but more than make it up by paying one shipping bill instead of two? The rules have changed, and consolidating purchases among fewer vendors might save you more money in the long run.

 Second, it changes the dynamic in the bidding process. You can negotiate with vendors, promising more business for discounted shipping costs. Increasing your range of purchases with a specific vendor gives you more bargaining power — more money is on the table.

Finally, it wouldn’t hurt to check in with your shipping department to get their perspective on rising transportation costs, and what you might be able to do to help them save money. It could be yet another negotiating point with vendors.

Then you might want to check these stats. The annual percentage of annual revenue lost to fraud by U.S. companies:

• a. 1%
• b. 4%
• c. 6%
• d. 8%

If you guessed “c,” you’re on the money. An incredible 6% of annual revenue went down the fraud drain, according to the Association of Certified Fraud Examiners. The tab for all companies in the U.S.: $660 billion.

Then why don’t I hear more about this, you might be thinking. There’s a good reason: Many companies keep fraud losses under wraps because the reports can undermine confidence in the business, and might even encourage others to try the same.

Managers and execs are responsible for more than two-thirds of the frauds — and they come with a higher price tag. When non-management employees are nailed for fraud, it usually involves around $62,000, according to the Fraud Examiners. But the cost goes up as you climb the corporate totem pole: managers, execs and business owners generally make off with between $140,000 and $900,000.

What makes fraud so difficult to detect is that it’s a byproduct of business transactions that appear to be perfectly legitimate — on the surface. Then, under the most likely scenario, the company “insider” schemes with an outside vendor to inflate invoices, charge for goods or products never delivered, etc.

In Procurement, part of your job is to try to pick up signals of fraud before they can be carried out. That’s why it’s even more important to keep a close eye on new vendors, especially if they seem to develop a particularly close bond with one of your everyday staffers.

Another way to try to keep on top of the situation is to request random audits, done by people in A/P, Finance or elsewhere. With the element of surprise always looming in the wings, it’s difficult for fraudsters to quickly cover their tracks.

Finally, there has been one big shift in favor of your company: Sarbanes-Oxley reporting requirements. Much of your company’s money flow and transactions go under a powerful microscope and can be detected by the seasoned pro. Also, companies are required to encourage whistleblowers to anonymously report misdeeds and wrongdoing.

With vendor negotiations, as you might have already learned, it’s also a case of timing is everything. But it’s not simply about remembering contracts or committing to delivery times. Drop the ball at any point in your contract or contract negotiations, and it could cost your company money — or worse, foul your company’s working relationship with a valuable vendor.

Supplier negotiations include three critical junctures. Here are the three, and advice for what actions to take at each one.

• Money, money, money. Patience, they say, is a virtue. It certainly is at this stage of negotiations. That’s why it pays to plan your strategy before you get to the table. Here’s what you need to know and anticipate: Don’t push hard early for a low-ball price. This tells vendors you’re going to try to squeeze them for cost cuts — and vendors will pump up that price. That makes you feel like you won the negotiation, after the vendor offers an inflated price and then “gives in”.
• Shake on it. When the deal is done, shake on it. Some people think this a good time to try to get a little extra in the deal. But most vendors will quickly see through this ploy and put you on the back burner. Treat the vendor like a partner, and show it.
• Never too soon. You know better than to wait until the last moment to start working out a contract renewal with a vendor. But here’s another idea: If terms are satisfactory to both sides, propose extending the current contract. Vendors tend to appreciate this very much, and are likely to demonstrate that.

Fortunately, the instincts you bring to your procurement job will put you on the right track. But you’re also bound to collide with those tough-nuts-to-crack — and you don’t want to handle that collision on their terms.

First of all, everyone — including yourself — has bad days. If someone who usually is fair tempered comes in one day as a growling grizzly, this most likely is the case. Best advice? Steer clear, say as little as possible, and wait for the storm to pass.

What about when you call one of your vendors with a question about quality — and the vendor pulls an Ozzy Osbourne and bites your head off? Again, your strategy is to keep your cool — don’t play their game. Instead, ask, “Is there a better time for me to call? It sounds like you’re wrapped up with another matter. Is there someone else I could speak to?” Offer an alternate way of handling the matter, and try to build in a small cushion of time.

Finally, there’s the situation where someone else in Procurement took a call from a vendor — and rubbed them the wrong way. You know what happens next: Your phone rings, with a vendor who’s had a few minutes to build up a head of steam. Your best plan? Apologize, and play the good guy. “What can I do to help you?” Don’t worry too much about changing the vendor’s mood. Instead, focus on handling the original problem.

There are three main tactics many vendors and suppliers can throw at you, in an attempt to make you fold your hand and see it their way.

1. We’re so poor.  When vendors plead poverty, it’s usually an attempt to convince Procurement pros to back off from arguing for lower prices. But you can turn it back on them: “If you’re that poor, will you be able to deliver to me on time? Will you live up to the terms of our contract?” This usually will put you back in the driver’s seat.

2. We don’t need you. This is when vendors and suppliers hit you with the old, “If you can’t accept a lower price, we’ll sell our goods elsewhere.” Most vendors don’t realize it, but their threat is often hollow. In most markets, they’ll run up against Procurement pros just like you, who won’t give in and pay a lower price. When you hear this from a vendor, it’s usually an indication they don’t have a very strong grasp of the marketplace.

3. Saving the worst for last. In some ways, it’s a positive to leave the toughest baragaining last on the agenda. You both get the chance to feel out each other’s style, strengths and weaknesses. But beware: If there’s a strict timetable for negotiations, leaving the toughest issues for last can be a disaster. Both you and vendors are more likely to rush into a deal that neither of you feel very good about. If the deadline’s flexible, it’s OK to leave these matters for last. But if it’s set in stone, insist that the harder baragining be done earlier in the negotiations.