As Procurement Pros, we’re all aware that our only job is to land the lowest price possible.

... Are you properly enraged at my oversimplification? Good – because this is the perception Procurement needs to fight among internal stakeholders as well as our supply base.

Too often, Procurement can be seen as the enemy on both sides. Suppliers see us come in, guns blazing, attempting to wreak havoc on relationships built over potentially decades of time just to beat them over the head on cost. Internally, departments like Marketing and IT breathe a heavy sigh and shake their heads when we walk through the door: Yet another Procurement professional who just “doesn’t get” what they do.

It doesn’t need to be like this. Procurement can (and should) be recognized as a pivotal element in developing, maintaining, and improving our relationships with our supply base. They key to this lies in proper supplier relationship management. Throughout the month, I plan on laying out how Procurement can build this proper SRM practice. In this first post, I want to set the stage by offering up a definition of what SRM should mean to you.

What is Supplier Relationship Management, REALLY?
Supplier relationship management is a term that gets thrown around a lot. It is often seen as a vague term because, honestly, everybody describes it differently. Many of the definitions share common ground, but are viewed through the lens of a specific spend category or industry.

Let’s begin by establishing a high-level definition we can use to start figuring out how we can go about improving our supplier relationships.

For the sake of this post, let’s consider SRM to be:
  • An actively engaged practice;
  • Meant to maximize the value of our supplier relationships;
  • On a proactive basis.
Simple enough for our purposes, but let’s unpack that a bit. By ‘actively engaged,’ I want to reiterate that this is a practice that we need to keep at. Like all relationships, key partnerships require attention – the moment you stop thinking in terms of SRM is the moment these partners become just another vendor. SRM is not a “tactic” you try when all else fails at the negotiation table.

‘Maximizing the value of our supplier relationships’ seems a bit vague. This is because the true value of any given relationship will vary from company to company and from one supplier to another. We can better understand this by considering what it doesn’t mean: If the only reason you speak with your suppliers is to wrangle a cheaper price out of them, then you AREN’T maximizing the value that supplier brings. Think of all the experience your account manager has from spending years focused on the products and services you purchase from his or her organization. Are we really prepared to write that knowledge off as just another order taker in the process of procurement?

The ‘proactive’ part is our ideal state. If we play our cards right on the first two bullets, then we should be on our way to building a machine. This machine will be automated, feeding us value without our prompting it to. In discussing the bullet above, I referenced reaching out to our suppliers – poorly, of course… in the example, we’re reaching out only to beat them down on price. However, let’s say we recognize the value of consulting suppliers on strategic initiatives we’re cooking. Our goal is to have those same suppliers reach out to us proactively – suggesting strategic moves that we can take within our organizations before we even realize the opportunity. Again, these people have spent years honing their knowledge about the products and services they offer. If anyone can help you with a strategic pivot, it’s them.

I’m Sold! What’s Next?
All of this sounds great. If supplier relationship management can help us not only maximize the value our suppliers bring, but also help Procurement become strategic development heroes, then let’s kick this in gear. So, what do we do now?

There are several steps we can take to get us where we need to be. In part two of this post, I’ll begin to review some key moves Procurement can make today to start down the path of best-in-class SRM.
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