Exclusive Vs Preferred Provider

Preferred supplier status indicates the vendor has been approved by the customer, but does that mean the corporate buyers cannot entertain proposals from other vendors for the same product?  The answer depends on how the contract is written – if there is a contract – and the nature of the purchasing arrangement.

In the promotional products industry, when a customer decides to outsource the corporate store for branded merchandise, a contract is necessary to protect both the customer and the vendor.  And somewhere in all that legal text should be a simple sentence that states whether this relationship is exclusive or preferred.  There should also be a definition of those terms, or the intended meaning could be open for interpretation – and therefore open for possible future conflicts between the customer and the provider.

I have participated in drafting and negotiating many contracts for the right to perform the duties of either the preferred or exclusive promotional products supplier.  I have generally fought for exclusive provider status, and often have won.  However, over the years I have seen how blending the best of both business procurement relationships can help build a stronger partnership with the customer, improve the service level and maintain competitive pricing.

If a vendor maintains a corporate store for the customer, a certain amount of exclusivity is necessary.  No experienced branded merchandise supplier would, or should, invest in this type of e-commerce solution without an assurance from the client that a certain level of purchasing commitment will be honored. That level of commitment will vary depending on the size of the organization, annual spend, geographical footprint and/or number of internal buyers, but having another resource for competitive ideas and pricing will keep freshness in the product suggestions and incentivize both vendors to give their best level of service every day of the week.

The argument for narrowing and refining the corporate vendor base remains as compelling as ever – the best service and pricing will come from the economies of driving more dollars to fewer suppliers.  But every supplier has its strengths, and if the corporate procurement team makes a conscious effort to blend the best of two or three providers to come up with a preferred vendor “team”, then they will have designed a more practical solution for the varied demands of their internal customers.

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