Supplier Relationship Management is a toolset designed for managing the relationship with your suppliers on a collaborative basis to ensure that the relationship is as constructive and indeed productive as possible.
However, it is important to view this as a strategic management tool that needs to be implemented in a structured fashion. It is not simply about ‘cosying up’ to the supplier; it is about a relationship that is fruitful and mutually beneficial.
It is therefore important to adopt a strategic approach to this relationship and to establish a framework for managing the relationship encompassing all the different aspects of the relationship. SRM depends on each supplier having a tailor made relationship with the customer. It may take time to establish an effective SRM, but the rewards can be significant and long lasting.
Typical aspects that are managed as part of the relationship are:
Value:
Value is integral to the supplier relationship, primarily because the whole relationship is based on the value added by the supplier. This might be in the form of price, product or service levels. Value needs to be a central concept within the supplier relationship.
Communication:
Communication is perhaps the key aspect of any supplier relationship. Various SRM technological tools are on the market to assist with implementing the relationship and SRM technology is developing quickly, which will offer even greater choice. However whatever the delivery mechanism exchanging information should be carried out in a clear and concise way.
Segmentation of Suppliers:
There is no single supply chain within any company so the supply chain has to be broken down into different segments. This ensures that the specific relationship with a supplier is appropriate in terms of what is being supplied. To bring it down to simplistic levels, you will want to manage suppliers who provide your cleaning products, differently from a supplier who equips you with 50% of your raw materials.
Resources:
There are different resources that are needed to ensure successful relationships are formed. Resources tend to be focused on the key personnel who need to work on a collaborative basis to establish SRM. These personnel need to have knowledge of the market, the risks that are involved and expertise within the commercial arena.
Accountability:
Akin to resources is the concept of accountability which requires senior management to take control of SRM and to be accountable for the process being successfully implemented; without this accountability there is a danger that the strategy can be allowed to wither and die. Few businesses have staff who only deal with SRM. It is usually something that someone does in addition to their other duties, which means that it is often regarded as a ‘bolt on’ to their jobs. So it needs a driving force behind it and accountability will act as that driving force.
Governance:
Governance is the framework for implementing SRM and is important with regard to ensuring that different segments of the supply chain are subject to different means of governance. It is not suitable to use one style of governance with different suppliers. So this has to be given some time and attention and at least initially, it can feel time consuming, but it is worth the effort in order to ensure the best governance for each segment.
Risks and Challenges
Inherent to any SRM are the natural risks and challenges that exist when customers have suppliers. These can never be completely eliminated and should always be acknowledged rather than being swept under the carpet. If there were no risks and no challenges with regard to SRM, it is possible that the process would be of little worth, but this is a way to manage those risks!
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