Looking to Crush It in SRM? We’ve Got You Covered
In today’s dynamic and competitive global market, mastering the art of Supplier Relationship Management (SRM) is no longer an option – it’s a must. A balanced mix of quality communication, meaningful performance tracking through Key Performance Indicators (KPIs), and shrewd supplier segmentation can elevate your procurement strategy to new heights.
Eager to unravel the mysteries of these tools and harness their mighty power? It may appear complicated, but the ‘SRM Simplicity Code’ is within reach. Welcome to a world where communication becomes a catalyst, KPIs are diagnostic tools, and segmentation is an art!
What is Supplier Relationship Management? And Why Does It Matter?
Effective SRM plays a key role in shaping the success of your procurement power.
CIPS defines it as, “the management and maintenance of the relationship between a buyer and supplier. The type of working relationship you should form with your suppliers, depends on the criticality of the goods or services being purchased and supplied into your organisation.”
By investing time and resources to nurture relationships, you’ll obtain multiple benefits including better product quality, cost efficiency, and risk mitigation.
How to Get Started?
The best way to get started is with some basic analysis of your suppliers. You might be surprised where even basic analysis will take you, so use structured methods to undertake your analysis rather than thinking you know best.
An often overlooked area of SRM is supplier segmentation and tiering. This involves categorising your suppliers based on three major variables – spend, risk, and strategic value.
Ask yourself these questions:
- How much do you spend with each supplier?
- How critical is each supplier to your operations?
- What potential impacts would a disruption, a quality issue, or a compliance violation have to your business?
- How aligned are the supplier’s offerings with your long-term strategic goals?
Suppliers are then generally classified into four significant categories:
- Strategic – suppliers are partners with unique capabilities, making them indispensable to your supply chain
- Operational – though necessary for your daily business needs, there may be alternative suppliers available
- Transactional – easily replaceable and often low risk purchasing
- Emerging – suppliers that have the potential to become crucial for your business.
Relationships are Key
Once you’ve done your analysis it’s time to turn your attention to building or improving relationships with your chosen suppliers.
Not all categories require the full, personal, one-to-one relationships, complete with management plans. For example, buying 1 million pens is most certainly a transactional purchase, so irrespective of the value of this, you should be looking to other categories where stronger relationships will benefit you the most. These may be categories where there is a limited number of suppliers, or alternative suppliers, where there is a reliance on suppliers to deliver business-critical goods or services, or where you are unavoidably single-sourced.
While there are many SRM tools you can use, building trust and transparency is the foundation for any sustainable relationship.
How to Build Trust
Clear expectations and shared goals are crucial in fostering trust and transparency. When both parties understand what is expected of them, it eliminates any ambiguity and creates a solid foundation for a productive relationship. Clear expectations help to provide a roadmap for the supplier, outlining what they need to deliver and when. It also helps them understand the standards they are expected to meet, improving performance and creating a stronger relationship.
In addition, shared goals ensure that both buyer and supplier are working towards the same objectives. This creates a sense of unity and collaboration, as both parties are invested in the success of the other, and encourages open dialogue and problem-solving, as both parties are motivated to overcome obstacles that may hinder the achievement of their shared goals. This level of collaboration and mutual investment can significantly enhance trust and transparency.
When expectations are clearly communicated and goals are shared, it allows for more open and honest communication. Suppliers are more likely to share information and provide updates on their progress, which can help prevent misunderstandings and conflicts. It also encourages suppliers to voice any concerns or challenges they may be facing, allowing for proactive problem-solving and further strengthening the relationship.
What Tools Can You Use to Support You?
The easiest tools may be right at your fingertips. Check and review your contracts, do you have Key Performance Indicators (KPI’s) in place? KPI metrics function as a thermometer, giving you a reading on the health of your procurement partnerships. Carefully analyse different indicators, such as the quality of goods and services, cost-effectiveness, delivery timelines, and the flexibility of your suppliers. Tie your assessment to tangible aspects of your interaction with your suppliers, including service levels, innovation ideas and the ability to meet your market’s changing needs. Aligning these criteria to your organisation’s values, culture, and vision will ensure that your contracts deliver to the maximum.
Combine It All – and Keep at It
Now that you’ve done your research, used some reliable SRM tools and methods to get to know your supply base, and turned your attention to quality relationships, make sure you document it in an SRM plan. Once you have a plan, don’t put it in the drawer and let it gather dust, the real results come from following through with the actions you identified. Set reminders to meet with your critical suppliers and stick to it.
Remember, this isn’t an overnight job. It calls for ongoing investment and attention, yet the payoff is well worth it – increased transparency, improved performance, and ultimately a stronger supply chain.
Stronger partnerships are just a chat away. It’s time to transform supplier conversations into strategic collaborations!
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