Supplier Relationship Management (SRM)
provides a formalized way of interacting and managing suppliers, that promotes
collaboration and innovation. In
a standard sourcing event, valuable time and resources are spent in both
sourcing and negotiating with key suppliers. By continuing the procurement
process and managing supplier relationships, your organization can not only
maintain, but improve upon any value that as acquired during the original
sourcing event, ultimately driving success within your organization.
The main objective of Supplier Relationship Management is to establish mutually beneficial relationships between the organization and its suppliers. However, traditional supplier management focuses on getting the best component for the lowest price. While that mentality may work for certain categories or commodities, it's likely that mindset will translate to a win for the organization, but a loss for the Supplier. Today, integrated supply chains need to expand their thinking and explore alternative ways to support the business. By properly managing supplier relationships, your strategic partners can operate as an extension of your organization.
With that in mind, how do we unlock the value of SRM within your organization? Supplier Relationship Management practices should complement and enhance both supplier performance and contract management activities. If managed properly, a comprehensive SRM can result in, cost reduction, risk and performance management, and program advisory.
- Annuals savings can be identified beyond the traditional cost reduction tactics, such as contract restructuring, process improvements, and/or demand management.
- Performance can be properly managed by providing transparency into your service level expectations and key drivers to meet defined business objectives.
- Mitigate supplier risk by establishing tools and processes that provide visibility into the enterprise-wide view of the supplier relationship.
- Increase collaboration and foster continuous improvement with strategic suppliers at an executive level by building cross-functional and executive relationships.
Once goals are achieved the program can successfully enter a maintenance phase that ensures the supplier is being managed properly, thus securing the benefits delivered to stakeholders and customers.