5 Effective Strategies for a Powerful Supplier Relationship Management

Supplier Relationship Management: 5 Effective Strategies

Supplier relationship management is an extremely crucial element of today’s supply chain management. That being said, business leaders are more and more realizing the necessity to have a powerful supplier relationship management strategy, businesses can still enjoy having an upper hand over the volume of businesses that don’t have one.

What is Supplier Relationship Management?

In layman’s terms, supplier relationship management refers to the process of interacting with and managing 3rd-party vendors who offer goods and services to enterprises. Now, this may sound simple enough. But it ain’t. The procurement teams have to identify and pick suppliers who are cost-efficient, flexible, and easy to work with to maximize the value of the business relationship.

Establishing and maintaining a wonderful supplier relationship is a must if you want to stay ahead of your competitors. Building a healthy relationship with your suppliers will assist you in ensuring your enterprise keeps on offering great products and services that bring delight to your customers.

To be honest, just like business practices, the supplier relationship management process also evolved over the years. It is more than negotiating prices with suppliers. Thanks to the advanced technology and the global scale of the economy, supplier management has gone through a drastic transition, especially over the last decade. With so many suppliers to choose from, it might be overwhelming to identify the right fit for your enterprise. However, utilizing a handful of effective strategies can help you streamline and automate your supplier management system dramatically.

In this post, we will discuss those effective strategies to get a better understanding of SRM.

1. Your suppliers are your partners

The first step in changing your current SRM strategy starts with treating your suppliers as your partners. If you view your supplier relationships as solely transactional, then it’s time to change your perspective.

Even if you have hundreds of suppliers across your supply chain who provide you with a variety of goods and services, your enterprise should make them feel like they are a vital element of your organization.

For instance, the procurement team can set up a mailing list to send out a fortnight or monthly updates or share newsletters with a detailed view of your upcoming product launch or other related promotional content. If not all, at least a few of them must have played an important part in successfully getting those products to market. So including them in your promotional and launch events will show them that their role is not just behind the screens.

Try to maintain your relationships with suppliers as a two-way street so that you can actually build a mutually beneficial business relationship.

2. Custom KPIs and measure supplier experience metrics

There are multiple ways to establish a strong, mutually beneficial relationship, however, this is one of the most efficient. Do you know how your suppliers feel about doing business with you? You will never know unless you ask your suppliers this question.

You might think not a single supplier complained or gave negative feedback. This is not always true. You should be able to measure your supplier experience.

There is a simple way to do this. You can set up a Net Promoter Score measurement for your suppliers to rate their experience and satisfaction levels. If the results are not what you hoped for, then you can certainly use those results to make changes to your existing supplier relationship management strategies and build an in-depth case study on the changes and progress you wanted to achieve and the positive results it brought to your enterprise.

3. Choose a strategic approach, not a reactive approach

A reactive approach is when organizations start managing the supplier relationships only when unfortunate or undesirable situations take place that includes suppliers. The procurement teams then try to improve the relationships with unreliable suppliers to get desired outcomes. The problem with this approach is it takes a lot of time and resources that enterprises otherwise could have spent on more productive and important activities.

A strategic approach is when supplier relationship management starts right from day one. In other terms, it starts the day you choose the suppliers with whom you want to work. This ensures the competitive advantage of the company in the long run. Actionable insights and feedback from key stakeholders and initiatives for long-term gains are executed. Now, this is a forward-focused approach with an effective strategic plan that can result in a successful business relationship with your suppliers in the early stages.

Time and again, the strategic approach to supplier relationship management has proven to be an integral part of a successful business regardless of the industry. For instance, Apple has made long-term relationships and building trust with its suppliers a vital part of its supply chain strategy. This helped them in becoming a global leader in supply chain management and made sure that Apple could never run out of inventory and deliver seamlessly across the globe when launching new products.

4. Plan for disruption using robust risk management

No matter what industry you are into, you can never 100% mitigate the potential for disruptions. It could be due to raw material depletion, a natural disaster, or some other unknown reason. The bottom line is disruptions will happen and better be prepared.

Work with your suppliers to help manage and eliminate those risks. By doing this, your relationship with your suppliers will strengthen and become more transparent and be in a more assertive position to deal with disruptions, whenever they occur.

5. Embrace technology for your SRM

Last but not least, investing in a good supplier relationship management software will go a long way in helping you build wonderful, long-lasting business relationships with your suppliers. Look for efficient custom solutions that can easily integrate with your current tools. From planning and managing SRM effortlessly to supplier invoicing and managing risk, you should be able to do supply chain management activities from a single dashboard.

Even though, all of the above strategies and practices may overwhelm you, in reality, following these tips can ensure you make informed and low-cost business decisions. Improving your supplier relationships and utilization of an efficient SRM software solution can greatly optimize and automate your supply chain, boost your relationship with suppliers, and add business value in both long and short term.

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