As the phrase implies, Supplier Relationship Management (SRM) entails managing the lifecycle of a business’s suppliers from selecting and onboarding suppliers right through to offboarding suppliers.
Although, most businesses have suppliers, they often do not put the same level of effort into building and managing the relationships with those suppliers as they do with their customers. Sure, without customers, businesses would cease to exist. However, without suppliers, businesses would not have products or services to supply to those customers or at least they would not have the ability or capacity to provide those products or services.
Besides the obvious strategic importance of managing suppliers, there are several benefits to managing supplier relationships. Amongst others, these include:
- Securing the supply of goods and services.
- Maximising product or input material quality.
- Minimising supply costs.
- Reducing supply chain and compliance risks.
SRM encompasses the following stages:
Selection & Evaluation:
Finding and selecting the appropriate suppliers is done by clearly defining what product or service is required from a supplier, receiving the required information or proposals or quotes from potential suppliers, evaluating the potential supplier offerings against the supply requirements, and appointing the preferred supplier.
Onboarding:
Ensuring that the preferred suppliers are correctly onboarded is essential. It is at this stage that the supplier gets a deeper understanding of the business’s operations, enabling the supplier to better meet the operational requirements. It is at this point that communication channels are clearly established and when key role players from both organisations initially meet and start building working relationships.
Performance Management:
Right from the initial selection and evaluation stage, right through to the offboarding stage, there will be clearly defined supplier performance indicators, against which the supplier’s performance will be measured, and which will be used to implement any corrective actions.
Development:
Depending on the nature of the relationship with the supplier, many businesses will assist with the development of their suppliers, through business and personnel development programmes or financial assistance.
Risk Management:
Regular reviews and audits of supply operations mitigate the risks of non-compliance to regulatory requirements and to internal business standards. Any corrective actions to address non-compliance are implemented by both the business and the supplier.
Offboarding:
The final stage in the SRM lifecycle is the offboarding of a supplier. This involves either the normal relationship end-of-life between a business and the supplier, or the termination of the supplier relationship due to inferior performance or unresolved non-compliance.
Although the relationship with a supplier may vary in terms of the goods and services provided by the supplier, the strategic importance of the supplier to a business, the short or long term nature of the supplier relationship, or the business environment such as the industry, it is crucial that some level of SRM is in place to minimise costs, reduce risks, sustain quality, and enable customer service.