It is more important than ever to make sure that your relationships with your suppliers are managed well. But what is Supplier Relationship Management and why does it matter? Supplier Relationship Management (SRM) is a structured approach to maximizing the value you get from your suppliers. This includes segmenting them into categories, creating a supplier strategy, negotiating contracts, monitoring performance, and leveraging technology. Let’s take a closer look at why SRM matters for your business.
What is Supplier Relationship Management (SRM)?
Supplier relationship management (SRM) is an approach to managing relationships with suppliers in order to gain the most value from them. By understanding the supplier’s capabilities, resources and objectives as well as their needs and expectations it is possible to create mutually beneficial agreements that will yield value for both parties involved. The goal of SRM is to ensure that all aspects of the supplier relationship are optimized including costs, quality, service level agreement compliance, lead times and innovation.
Benefits of Pursuing Supplier Relationship Management Best Practices
Adopting best practices in SRM can have many benefits for businesses. Examples include:
- Increased cost savings due to better negotiations with suppliers
- Improved supplier performance due to better communication
- Reduced risk due to greater visibility into supplier operations
- Improved speed-to-market due to better collaboration with suppliers
- Increased customer satisfaction due to improved product quality and reliability
- Improved compliance with regulatory requirements
Additionally, pursuing SRM best practices can help businesses create strategic partnerships with key suppliers which will enable them to access new markets or technologies more quickly thereby increasing their competitive edge.
Challenges Associated with Supplier Relationship Management
Despite its potential benefits, there are some challenges associated with implementing an effective SRM program. These include:
- Inadequate visibility into supplier operations
- Lack of clarity regarding roles and responsibilities between buyers and suppliers
- Inadequate communication between buyers and suppliers
- Difficulty assessing supplier performance accurately
- Inability to secure long-term commitments from strategic partners
- Lack of standard processes across the company
- Limited access to real-time data about supply chain operations
- Difficulty aligning incentives between buyers and suppliers
What to Look for in SRM Software
With increasingly challenging global supply chains, SRM software is an invaluable tool for managing suppliers and ensuring a return on investment. Here are some of the capabilities you should look for in an SRM solution:
- Simple supplier onboarding and data maintenance processes
- Collaborative goal setting and performance monitoring
- 360° view of supplier data for real-time visibility into the supply base
- Automated risk management alerts
- Comprehensive supplier scorecards
Conclusion
For businesses to remain competitive in today’s market they must develop an effective SRM strategy that takes into account all aspects of the relationship between buyers and suppliers. This includes segmentation, strategy development, negotiation of agreements, performance monitoring and leveraging technology where applicable.
By implementing comprehensive SRM they will be able to reap the many benefits associated with pursuing best practices while mitigating against any potential challenges they may face along the way. Ultimately this will lead not only lead them on a path towards greater success but also provide them with a competitive edge when compared against their competitors who have yet to adopt such strategies.