Supplier Relationship Management – The Essential Guide
This blog about supplier relationship management (SRM) was initially published in October 2021. All relevant information has been updated as of October 2022.
One of the first pillars of a healthy supply chain is the ability to create and maintain strong supplier relationships. In our whitepaper, Essential Guide to Supplier Relationship Management, we go over the most pertinent questions regarding managing relationships with suppliers and the benefits of proactive management.
Keep reading to get a sneak peek into some of the critical findings featured in our guide.
When it comes to strengthening your relationships with suppliers, organizations inherently understand the importance of building connections based on trust. If your suppliers are happy, you retain familiar partners, condense the number of suppliers you use, and grow to anticipate your suppliers’ needs.
Instead of spreading yourself thin trying to please a variety of suppliers that could jump ship, investing in these valuable relationships helps extend the lifespan of your partnerships as well as keep your supply chain healthy and agile.
Why Do We Need Supplier Management?
Supplier relationship management (SRM), or the entire lifecycle of a B2B company relationship comprising a myriad of business processes and activities with any supplier, can be broken down into two main areas.
1. Evaluation of Suppliers, Both Initial and Ongoing
The first is evaluation of purposes. Essentially, an organization must know if suppliers are performing as required. A supplier relationship cannot be fully functional without understanding how the relationship benefits both parties.
2. Continuous Measurement and Improvement to Maintain Value
The second area is to find areas where suppliers can improve and engage with them throughout the life cycle between the supplier and the organization.
This is why we need supplier management. Value is what underscores the relationship between the supplier and the organization. The requirements, which are a crucial underpinning to the supplier relationship, can flex and change throughout the lifecycle with that supplier.
Not only is it necessary to identify the requirements and ensure suppliers meet them initially, but it’s also essential to continuously improve relationships with your suppliers to get the most from their products and/or services via the use of supplier relationship management software or platform.
Continuous improvement involves tracking and measuring performance consistently. It also involves a great deal of communication and a feedback loop. For that to occur, a transparent, communicative, and collaborative relationship must exist so suppliers and companies can find areas to improve with efficient solutions.
Leading Reasons Why SRM Has Become So Significant
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- Increasing interest in localization and globalization when it comes to locating suppliers
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- Increased operational scale
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- The rising complexity of supply chains means there are more suppliers to manage
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- Additional risk and compliance concerns impacting supply chains
In the face of challenges presented by the modern supply chain ecosystem, the benefits of supplier relationships have come to the forefront.
Since 2020, all industries have felt the repercussions of the COVID pandemic, the war in Ukraine, political unrest, natural disasters, and other humanitarian issues. Knowing how these events have changed the traditional management of supplier relationships is the key to adapting to the present and ensuring supply chain resilience for the future.
The Five Benefit Pillars of Supplier Relationship Management
Supplier relationship management is based on five main benefit pillars. Knowing these pillars is important, so you can keep your eye on the benefits a good SRM strategy can offer. We often get caught up in contracts and paperwork (or its digital equivalent). However, neither of those things is representative of a real relationship.
The five central tenets SRM revolves around are the following:
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- Mutual growth
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- Value creation
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- Trust
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- Open communication
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- A win-win mindset
We’re predominantly focusing on managing a relationship that encompasses these Five Pillars. For a long time, companies set objectives, and that was it. Suppliers were not considered as part of the equation.
Today, with the prevalence of supplier relationship management, suppliers are moved from the back seat of negotiations and brought into a more central role. Innovative supply chain leaders understand that suppliers are the beating heart of the procurement process—now more than ever.
Enter Supplier Relationship Management or SRM.
