Supplier relationship management (SRM) is evolving from being cost-focused to a more holistic approach that values using technology to build resilient businesses and strengthen partnerships.
While customers are the heart of your organization, its suppliers are the lifeblood.
If you want to keep your company going strong, you’ve got to maintain healthy relationships with your supply network, and that’s where supplier relationship management (SRM) comes into play.
Below, we’ll explore the ins and outs of supplier relationship management, covering everything from examples of the concept to the benefits it can provide.
Supplier relationship management is the process of evaluating vendor partners, assessing their strengths, and building mutually beneficial relationships resulting in improved product pricing, accurate planning, rapid responses to adverse events, and ultimately reduced risk in operations and supply chains.
If a partner is underperforming, SRM gives you the opportunity to pinpoint their shortcomings and address them in hopes of salvaging and enhancing the relationship.
At its core, SRM is about strategically planning and managing all interactions with third-party organizations that provide goods or services to your business.
This is a process akin to building a bridge between your business and your suppliers to ensure mutual success.
SRM functions by assessing suppliers’ contributions to your business, developing strategies to strengthen these relationships, and continuously evaluating these strategies.
The concept isn’t just about negotiating prices; it’s about creating and nurturing a network of reliable suppliers who understand and align with your business goals.
Examples of supplier relationship management may include:
Always keep in mind, no matter how you choose to approach SRM, that these partnerships need to be mutually beneficial, and they require that both partners remain in sync.
While it is important to relay your expectations and needs, you should also identify the aspects of the relationship that make you valuable to your trading partners.
Gone are the days when supplier management was just about getting the lowest price; today, it’s all about building partnerships, embracing digital solutions, and adapting to dynamic business environments.
Similar to customer relationship management (CRM) modern SRM recognizes that strong supplier relationships contribute to a company's overall success and sustainability. And the right technology can help you become more adaptable and agile, benefitting your business, suppliers, and customers. Here are just a few examples.
Simply put, technology helps you look beyond dollars and cents and address all the factors that make your supplier relationships mutually beneficial.
When you prioritize SRM, your business, its trading partners, and most importantly, your consumers win. The following are just a few examples.
While supplier relationship management isn’t solely about cutting costs, investing in SRM technologies and processes can, and often does, lead to substantial savings as well as better pricing for your customers.
Healthy relationships can lead to better terms, volume discounts, and more efficient processes that save you and your customers money in the long run.
Additionally, through SRM, you can zero in on partnerships that no longer make financial sense and work to modify them.
Strong relationships with suppliers mean you can count on them to deliver on time and adhere to your quality and consistency standards.
That level of trust is incredibly valuable, especially when the unexpected happens, such as global supply chain disruptions.
Effective communication is the bedrock of any strong relationship. With SRM, it ensures that both parties are on the same page, for fewer misunderstandings and more efficient operations.
When an issue does arise, you will already have a rapport with your supplier’s point of contact, and the two of you can work together to devise a solution that makes sense for everyone.
You can never know what challenges will come your way in a given year, but if you and your supply partners are committed to one another’s success, you’ll be better equipped to weather any storm and continue meeting the needs of your customers.
You will also have a functional understanding of essential supply processes, allowing you to protect the most important links in your chain.
Not all suppliers are created equal, but proper SRM efforts will help you identify which relationships need more attention and resources, ensuring that your most critical suppliers are given the priority they deserve.
Your suppliers can be one of your greatest sources of innovation.
When you routinely collaborate with your trading partners, you’ll be able to tap into their knowledge, technology, and unique perspective to enhance your own products or services and better serve your customers.
Supplier relationship management has experienced considerable change over just the last few years.
Businesses are no longer focusing solely on price, instead considering what other types of value their partners can provide. Through SRM, you can do the same, thereby unlocking the true potential of strategic partnerships.
That said, the key to better supplier relationship management is technology. With modern SRM technology at your disposal, you can better understand and monitor your trade partners.
Moreover, you can conduct a comprehensive analysis of these partnerships, identify weak points, and proactively strengthen them.
In a world where knowledge is power, SRM can give you the insights needed to thrive, but succeeding at the concept requires an approach that balances people, processes, and proper supplier relationship management technology.
Nevertheless, by proactively nurturing your relationships, you can cultivate a strong, resilient supply network founded on mutual trust and respect.
You can learn more about supplier relationship management benefits and how you can tap into them with modern technology solutions by connecting with Epicor today.
