A Supplier Relationship Management (or SRM) programme can deliver significant benefits for both the supplier and the buyer. But exactly what is a SRM programme and how does it deliver value? Here are some commonly asked questions and their answers.
Q. What exactly is SRM?
A. Type supplier relationship management into any search engine and the chances are that it will return several hundred thousand hits. The majority of these will be related to software applications. Yes, you may need an application to track details about your suppliers but a real SRM programme is far more than this. It is a way of working with your critical and strategic suppliers to systematically identify opportunities to reduce cost, improve service and quality and innovate. These opportunities are then run as projects with team members from both sides.
Q. Why is SRM needed?
A. In more and more situations it is no longer individual organisations that win but the supply chains in which they operate. Businesses (and increasingly public sector and not-for-profit organisations) cannot survive in isolation. They need to form strong alliances with partners up and down the supply chain and together find innovative ways to serve their end customers better by being better, faster and cheaper. This is the reason and basis for SRM.
Q. Who should you partner with?
A. If SRM is to work it has to deliver benefits for both the buying and supplying organisations. This means that you have to partner with those suppliers with whom you can forge a mutual benefit. This might be because you can drive out cost by merging operations (this is at the core of the reason for outsourcing) or because together you can develop superior products (take a look at industries such as automotive) or because you need each other to win profitable business (much as IT related companies form alliances to bid for work).
Your starting point to identify SRM partners is to create your supply positioning matrix (importance of the things you buy versus the supply risk or complexity) and identify the suppliers for your categories in the strategic quadrant. Then look at the preferencing of each of these suppliers (whether or not the market is important to them and whether or not you are seen as a key account). Where there is a match between the category being strategic for you and a supplier who also sees the market and you as core to them then you have a potential SRM partner.
Q. How do you go about starting a SRM programme?
A. When you have selected a potential SRM supplier check with them that this is a strategic intent for them as well. Decide how you are going to baseline the relationship and then measure where you are. Identify the gaps and start to drive out projects that will close the gaps. Supplement this with an exercise to map each side's goals against the other and see if this suggests ideas for developing a mutual benefit.
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Do you want to learn more about effective supplier management?
If so, download my brand new free ebook "The 6 Steps to Effective Supplier Management" here:
http://www.SourcingStrategyWizard.com/Supply_Mgt.htm.
Steve Carter is an experienced procurement practitioner and published author and runs online training and coaching courses.
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