A recent study revealed that luxury goods brands ensure strong relationships with suppliers to instill a high sense of trust and support. In this type of collaborative setting, suppliers are more willing to push their capabilities and go the extra mile to confirm quality. With the value they realize from relationships, it’s no surprise that premium brands have a thorough understanding of SRM and how this guides their strategy closer to objectives. With that in mind, SRM enthusiasts are left to wonder what makes the luxury goods market so easily cognizant of the importance of supplier relationships and why haven’t other industries caught on as actively.
One interesting, yet arguable point presented by Supply Management, states that “[Premium brands] are also more driven by being the ‘customer of choice’ for suppliers, rather than obtaining cost savings, because of their focus on quality, exclusivity, cutting-edge technology and customer experience.” This can be true in luxury brands for the reasons listed; however SRM programs don’t have to be major cost centers. They can be just as effective, even in the luxury goods industry, with a cost-saving inclination. In fact, SRM programs are a great tool to mitigate risk and minimize costs.
Nothing bridges the gap between procurement’s category strategies and stakeholder needs like supplier management. If there’s a growing appreciation for that, it’s probably attributable to a growing maturity among functions that effectively communicate and manage the relationship between suppliers and stakeholders, as well as more nuanced technology.
SRM Programs are also prevalent in luxury brands because these high-end organizations feel the need to build and maintain loyalty with their suppliers. In return, the supplier will have a very positive opinion of their brand and they are more likely to receive good feedback from suppliers. However, this is not the only requirement when it comes to SRM. Another quality that is extremely important, which luxury good organizations seem to lack, is the ability to develop and incorporate a well-organized procedure that will help reduce costs.
In a recent study completed by Supply Management they state, “When asked how the procurement function would evolve over the next three years, just under two thirds of respondents thought the role would grow in importance, moving to making board level decisions. A fifth of those polled said their CPO already had a place on the board.” This poll is one example of how important it really is to build relationships in order to attain continuous success, not only internally with stakeholders but also externally with suppliers.
The possibilities of enhanced supplier management practices by enriching every point of interaction between the business and its suppliers are huge: governance, risk management, innovation, and enhanced spend visibility. The right system could change the entire relationship and empower stakeholders to make informed buying decisions. This can be achieved in an assortment of ways which best fit each business’ objectives. Source One helps organizations manage their SRM activity in a way that is best suited to their organizational needs.
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