In a nutshell, supplier relationship management is important because a long-term relationship between an organization and its suppliers allows for the free flow of feedback and ideas. Over time, this yields a more streamlined, effective supply chain that often has a positive impact on costs and customer service.
Before we go any further, let’s define SRM: This concept refers to the systematic approach of assessing suppliers’ contributions and influence on success, determining tactics to maximize suppliers’ performance and developing the strategic approach for executing those decisions. As a key part of vendor management, SRM comes into play when organizations segment their suppliers and determine important supply categories for the purpose of devising strategies capable of managing their supplies and suppliers more effectively.
The Three Primary Steps of Supplier Relationship Management
Supplier relationship management is primarily comprised of three steps:
- Supplier Segmentation – Refers to differentiating suppliers as a means of identifying opportunities and risks.
- Supplier Strategy Development – When an organization devises an optimal method of interacting with suppliers based on business goals and needs.
- Supplier Strategy Execution – Executing the designed strategy – determined during the previous step – in an effective way to obtained desired results in line with the organization’s goals.
The Nitty Gritty on Why it’s Vital
While we all know (or should know) that purchasing is the key strategic role in keeping a business going by generating revenue – while also managing its expenses – a dilemma arrives when supplier relationships are poor, rendering both parties susceptible to a loss of big time and money. It is for this reason that building and managing good supplier relationships generates incredible value for an entire organization; after all, SRM is all about helping create positive buyer-supplier relationships to determine which activities to engage in with each supplier.
iQuantum Fun Fact: The goal of SRM is to streamline and improve processes between a buyer and its suppliers, which is why the process focuses intensely on developing a mutually-beneficial relationship with suppliers – especially those deemed as most strategic to the brand in order to promote efficiency, quality, innovation and other benefits.
The bottom line is that relationships with suppliers should never be one-sided; they should always be based on mutually-beneficial agreements. In best-case scenarios, there’s a win-win situation for both parties when they’re satisfied by their business relationships.
iQuantum SRM is taking this concept to new heights. Contact us today to learn more.