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.
What is Supplier Relationship Management (SRM)?
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.
How Does SRM Work?
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:
- Regular Meetings and Workshops: Both parties meet to discuss new tech, designs, and materials
- Shared R&D Efforts: Joint research helps aid in the success of both parties
- Feedback Loop: Continuous feedback from each side of the relationship helps partners better understand one another
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.
How Has Supplier Relationship Management Changed?
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.
- Electronic procurement systems can automate procurement processes and provide real-time visibility so you can meet customer demands consistently.
- Supplier portals enable suppliers to manage their accounts, submit invoices, and communicate directly with buyers, saving time and eliminating friction.
- CRM and SCM software can provide a comprehensive view of suppliers, track supplier performance, monitor compliance, and identify opportunities for improvement.
- AI can automate routine tasks, identify patterns and trends in supplier data, and help you make faster, more informed decisions.
- Collaboration tools: Enable companies and suppliers to collaborate more effectively, share information, and work together to identify opportunities for improvement.
Simply put, technology helps you look beyond dollars and cents and address all the factors that make your supplier relationships mutually beneficial.
Why is Supplier Relationship Management Important?
When you prioritize SRM, your business, its trading partners, and most importantly, your consumers win. The following are just a few examples.
Cost Savings
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.
Trust and Reliability
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.
Increased Communication
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.
Improved Adaptability
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.
Prioritization
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.
Use of Innovation
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.
The Future of Supplier Relationship Management
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.
Get Advice on the Supplier Relationship Management
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.
