What is supplier relationship management and why does it matter

Supplier Relationship Management: Why Does It Matter?

what is supplier relationship management and why does it matter

Supplier relationship management (SRM) – which emerged as a term or an idea only a few years ago – has rapidly gained traction in the marketplace. SRM is. This definition explains the meaning of supplier relationship management (SRM), a comprehensive This makes the electronics maker a key strategic partner. Supplier relationship management should be regarded as the introduction of a company-wide philosophy aimed at securing greater.

People — Without people, there is no supplier relationship management, so developing the SRM skills of procurement and supply chain professionals is crucial.

what is supplier relationship management and why does it matter

Technology — Software can help SRM initiatives by improving communication and collaboration among all parties, which brings us to the final pillar. Collaboration — A collaborative approach to supplier management allows businesses to get more minds together on solving problems and innovating.

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It also makes the business a more attractive customer for the supplier. Solving the Value Puzzle In the figure above, State of Flux divided survey respondents into leaders, followers and others, according to the success and maturity of their SRM programs and how well they are doing on each pillar.

Supplier relationship management

Followers fall between these two categories, though the report notes that there is an increasing gap between leaders and followers. But as you might have guessed from the report title, entrepreneurial procurement is the overarching theme of the report. How can procurement innovate and stay relevant, and how can SRM be a tool in doing so? How much savings can procurement realize through SRM? In subsequent posts, we will address the topic of entrepreneurial procurement, as well as other findings from the State of Flux report.

Effective SRM requires not only institutionalizing new ways of collaborating with key suppliers, but also actively dismantling existing policies and practices that can impede collaboration and limit the potential value that can be derived from key supplier relationships.

what is supplier relationship management and why does it matter

Organizational structure[ edit ] While there is no one correct model for deploying SRM at an organizational level, there are sets of structural elements that are relevant in most contexts: A formal SRM team or office at the corporate level.

The purpose of such a group is to facilitate and coordinate SRM activities across functions and business units.

  • What is Supplier Relationship Management and Why Does it Matter?
  • Supplier Relationship Management: Why Does It Matter?

SRM is inherently cross-functional, and requires a good combination of commercial, technical and interpersonal skills. Such individuals often sit within the business unit that interacts most frequently with that supplier, or may be filled by a category manager in the procurement function.

This role can be a full-time, dedicated positions, although relationship management responsibilities may be part of broader roles depending on the complexity and importance of the supplier relationship see Supplier Segmentation.

what is supplier relationship management and why does it matter

An executive sponsor and, for complex, strategic supplier relationships, a cross-functional steering committee. Effective governance should comprise not only designation of senior executive sponsors at both customer and supplier and dedicated relationship managers, but also a face-off model connecting personnel in engineering, procurement, operations, quality and logistics with their supplier counterparts; a regular cadence of operational and strategic planning and review meetings; and well-defined escalation procedures to ensure speedy resolution of problems or conflicts at the appropriate organizational level.

What is Supplier Relationship Management and Why Does It Matter? | SIG - Sourcing Industry Group

Further, suppliers can be segmented by the degree of risk to which the realization of that value is subject. Executive-to-executive meetings Strategic business planning meetings, where relationship leaders and technical experts meet to discuss joint opportunities, potential roadblocks to collaboration, activities and resources required, and share strategies and relevant market trends.

Joint business planning meetings are often accompanied by a clear process to capture supplier ideas and innovations, direct them to relevant stakeholders, and ensure that they are evaluated for commercial suitability, and developed and implemented if they are deemed commercially viable.

what is supplier relationship management and why does it matter