Supplier Relationship Management is essential for any organization’s success, but it’s surprising how many fail to execute it effectively.
What are the common errors, and how can they be addressed?
Watch the video below as Trent share his expert advice, offering actionable tips to strengthen your supplier relationships and drive results.
Why Supplier Relationship Management (SRM) Matters?
Supplier Relationship Management (SRM) is a critical part of the supply chain that often doesn’t get the attention it deserves. While most organizations are heavily focused on managing customer relationships, supplier relationships can have just as much, if not more, impact on the overall success of a business.
The Core Purpose of SRM
SRM is about more than just meeting contractual obligations. It’s about managing supplier partnerships in a way that creates value for both parties. Without proper management, supplier relationships tend to deteriorate soon after the initial setup phase. Businesses may only get the bare minimum—exactly what they agreed to—but nothing more.
With effective SRM, you can go beyond this transactional approach. The goal is to build a collaborative relationship where suppliers actively invest in your supply chain. This can lead to greater innovation, cost savings, and improved performance. When SRM is done well, it creates what’s called a “J-curve effect,” where the value generated from the relationship far outweighs the cost of maintaining it.
Common Pitfalls in SRM
Many businesses make the mistake of focusing solely on performance metrics like Key Performance Indicators (KPIs). While hitting KPIs is important, it’s not enough to build a strong relationship. Suppliers are often experts in their field, and SRM is an opportunity to leverage that expertise for mutual benefit.
Another area where companies fall short is communication. Clear and consistent communication is the foundation of any successful relationship, and SRM is no exception. A strong SRM framework includes regular discussions at different levels: operational, tactical, and strategic. These meetings ensure that immediate problems are resolved, and long-term improvements are explored.
If you’re unsure whether your SRM processes are working, start by checking your calendar. Are regular meetings with key suppliers scheduled for the year? If not, it’s a sign that SRM isn’t being prioritized. Scheduling these meetings shows commitment and provides a platform for collaboration.
Who Should Manage SRM?
SRM responsibilities usually fall under procurement teams because of its connection to contracts. However, operations teams are equally important, particularly for managing day-to-day aspects like costs, safety, and service performance. Strategic discussions require collaboration between procurement and operations to ensure alignment and action.
By making SRM a priority, businesses can strengthen their supply chains, encourage supplier innovation, and achieve greater efficiency. It’s about turning supplier relationships into valuable partnerships that go beyond the basics and deliver lasting benefits.
Related articles on this topic have appeared throughout our website, check them out:
- 4 Tips for Effective Supplier Performance Management
- 3 Practical Metrics for Supplier Performance Evaluation
- Why 3PL Relationships are Fraught—And How to Manage Them
Editor’s Note: The content of this post was originally published on Logistics Bureau’s website dated March 08, 2023, under the title “Supplier Relationship Management Tips“.
