Establishing a formal supplier relationship management program within your organization can be challenging. Some risks that come into play include ensuring the right level of accountability with the suppliers versus the organization, the effect that ill-defined roles and responsibilities can have on the program, and maintaining a successful program throughout the life of the contract. The best way to mitigate these risks is to ensure that the program is well structured from its onset and that the right people are in place to manage the program on an ongoing basis. The following tips will help guide the proper design of a Supplier Relationship Management (SRM) program.

Developing an SRM program starts long before the supplier on-boarding process with effective strategic sourcing. It is critical to select the right business partner – one that shares an understanding of the organization’s culture and goals – especially in more strategic partnerships. Always try to keep in mind the end state vision and future plans when selecting suppliers during the sourcing process, this will help to ensure the supplier will fit into those plans adequately.

Along these same lines is the necessity to have a person or small team assigned to manage the supplier relationship from contract negotiations through the on-boarding process and throughout the life of contract, the earlier they are involved the better chance they have of appropriately establishing the parameters of the relationship. This should include regular communication at the account management level to ensure that service levels are being consistently met, that the scope is being adhered to, and that pricing remains within the agreed upon conditions. These interactions aid in the support of assigning accountability to each side of the relationship. Understanding who is responsible for what in the contract is dependent on the scope of the category and agreement, however typically the supplier is required to maintain such conditions as service level agreements, processes and procedures, quality and on time deliverables, and more. Consequently, accountability is not a one-sided story, the business is typically responsible for maintaining up to date information provisions, processes and procedures, and ensuring that approvals are provided in a timely fashion as to not disrupt the supplier’s timelines, among other things. Communication is the key to ensuring that all involved parties are maintaining their end of the deal. Within these elements lie accurate and well-defined roles and responsibilities. Accountability cannot loosely fall on one party or the other, there needs to be clear assignment of tasks and general duties. Just as in any well-organized plan, without specifically assigned roles and responsibilities, the relationship and subsequent contract can easily become derailed.

Another key element to Supplier Relationship Management is continuity. At the onset of a new contract all those involved typically pay close attention to the contract terms but within months this attention slowly begins to slip away and drive to other priorities. Before you know it the contract is up for renewal and there is a convoluted mess to deal with – irrelevant SLAs, out of date account structures on file, and pricing that does not apply to the scope of work being conducted today. This is another vital reason that a specific team be assigned and held accountable for managing all aspects of the relationship throughout the entire life cycle of the contract. Not only is there a great deal of risk to the business, but there is also much more work involved in renewing an agreement that is essentially obsolete.

Developing and implementing a proper Supplier Relationship Management takes time and expertise. Follow me to learn more about Supplier Relationship Management and Source One’s experience.
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Jennifer Ulrich

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