Latest procurement and supply chain news, opinion, analysis, practical advice and tips from Supply Management, the official The three crucial phases of effective supplier relationship management Popular Articles. effective capturing and leveraging of this capital. This series of In this article, supplier relationship management and its contribution to sustainable competitive. This article provides a briefing on introducing supplier relationship management for the first time. Businesses have a sense that developing.
The seven facets of supplier relationship management - Procurement Blog - Procurement Leaders™
Revenue Growth Both supplier and buyer can increase their revenue growth through greater and improved relationship. Working in closed collaborations or through a joint venture, both organization in an SRM program can go after new market opportunities, sharing of the market risks and potential growth.
Cost Savings In the long run, SRM process and practices can help to reduce future problems, quality issues and delays. By concentrating on establishing and developing long term relationships these costs can be offset, with both parties actively looking to avoid any unnecessary costs which may arise from re-tendering, re-negotiating or being forced to exit an existing contract early. Better relationships and increased interaction will lead to less incidents or issues of poor performance, which in turn lead to lower costs for managing the relationship and reduced costs through failures.
Also, vendors are more confident and willing to share cost efficiencies gained through the adoption of new technologies or methodologies which mutually beneficial cost advantage from both operational and unit cost perspective.
Continual Improvement Long term relationships provide the opportunity for buyers to engage suppliers in a process of continual improvement of both products and services provided and of the accompanying service levels. Preferred Buyer Status Constantly changing suppliers is an expensive and time-consuming process as it will take the internal resources to resource for new suitable suppliers and negotiate the contract for better cost.
Key Strategies to Build an Effective Supplier Relationship Management
Even if the new supplier may provide lower cost, the long-term relationships built with strategic partners generates more value over the short-term gains.
By maintaining supplier relationships, buyer can establish a clearer cost base and provide total price visibility. The Challenges of Implementing SRM Even with all the potential values gain with supplier relationship management program, there is still quite many companies are not implementing SRM.
This is because moving a company to play a more strategic role in managing suppliers requires change management and a shift in perspective both internally and on the part of supplier. SRM program must be supported by the entire organization on both side.What is Vendor Relationship Management in the New Customer-Centric Age?
As companies downsize and resources tighten, many employees do not have the time to handle more responsibility or attend time-consuming meeting. Furthermore, many departments believe that they are already managing their suppliers well enough that implementing new program is not required.
The three crucial phases of effective supplier relationship management - Supply Management
Communications Keeping channels of communications open and robust goes a long way towards keeping you and your suppliers on the same page.
Furthermore, it also helps to understand their language and culture to avoid any communication breakdown.
The overarching strategic approach to determine and implement different supplier-based interventions, including the development of collaborative relationships with the critical few suppliers who can make the greatest difference; prioritised against available resources, applied as appropriate across an entire supply base to maximise value to the organisation, reduce supply chain risk and enable the organisation to achieve its goals and enhance value to the end customer.
It is important to understand that SRM is not a single linear process. Instead, it is an organisation-wide philosophy and concern that requires different functions work together.
These are unique to each organisation and are not sequential but, rather, each forms part of and creates the whole — like the individual facets of a precious gem. The seven facets of SRM comprise the interrelated strategic components that enable, inform, direct and support each other and that surround, shape and determine the central facet, which is the specific interventions and what exactly a company will do with its chosen suppliers or supply chains to unlock value.
The three crucial phases of effective supplier relationship management
Strategy In other words, how SRM enables, supports, as well as flows from, our company goals and how we will achieve these. Any strategy will comprise the mission, aims and goals of the organisation and these must inform and be informed by our SRM programme as part of a cohesive, company-wide sourcing, satisfying and strategy approach.
Requirements We must be clear about the value that we need to secure from the supply base overall to realise our strategy and, therefore, the specific value we need from our relationships with our most important suppliers or supply chains. Governance How will we make it happen?
The company-wide day-to-day arrangements that ensure we are organised and equipped for SRM and its ongoing management for results across the entire organisation.
Segmentation How do we decide who is important? Segmentation is a structured approach to determine which suppliers are important if we are to unlock value from the supply base. Importance Who is important? Based on the answer to question four, for our important suppliers, we must decide how important they are — or if they are strategic — and what makes them so. Prioritisation Where and when should we focus our efforts?