ISM - Supplier Relationship Management Insights
Supplier relationship management (SRM), in simplest terms, refers to interacting with and managing third-party vendors that provide goods. The term "supplier relationship management (SRM)" refers to the practice and process for interacting with suppliers. Most supply professionals view SRM as an . Indeed, finding good suppliers and maintaining solid relations with them can be an invaluable tool in the quest for business success and expansion. In fact, a.
While there are seven very clear facets, SRM is complex. To use an analogy, SRM is like an orchestra. Each section of an orchestra plays when needed and according to the piece of music, all working in unison and taking their lead from a single conductor.
This is how SRM needs to work to be successful.
Supplier relationship management
Every component of the SRM orchestra must play as and when needed and according to what is appropriate for the circumstances, environment and point in time. The conductor, meanwhile, provides the governance framework that guides how the various interventions come in or drop back. Every important supplier has its own piece of music and the melody changes constantly.
This article is adapted from the second edition of Supplier Relationship Management: This contributed article has been written by a guest writer at the invitation of Procurement Leaders.
Procurement Leaders received no payment directly connected with the publishing of this content. Scale Assurance of supply There are more, and observation of seasoned supply professionals shows that the need and thrust of interaction with suppliers can and does change.
What is Supplier Relationship Management (SRM)? | Liaison Technologies
Many said that once the main SRM goal was attained with a supplier, they moved on to others in layered progression. Some have said that the flux in markets and among suppliers causes shifts in emphases to have to be applied even from one period to the next. SRM is often brought into play when a looming sourcing issue or opportunity arises. In current times there is concern of supply price inflation from an economic boom and growing middle classes in China, India, and other developing countries.
Too, demands upon a shrunken manufacturing capacity base in the developed world, or weakened financial condition of many companies, causes worry about continuity of supply. SRM is useful in taking initiatives with upcoming needs and the condition of the supply markets that can reap rewards of problem avoidance.
Cavinato's research revealed approximately different forms of formal and informal relationship links between buyers and suppliers. Each one is a relationship supply chain.
These roughly group into the following eleven relationships, listed from none to full integration: Don't know the supplier exists, no reason to use them Don't know they exist, might use them Arm's length price relationship Price relationship, informally cooperate on operating level for efficiencies Price relationship, formally cooperate for longer term efficiencies Total cost relationship Innovation and top-line, revenue-driven relationship Joint venture One invests in the other, gains benefits from having done so One purchases the other, vertical integration SRM is mostly found with relationship numbers 3 through 6.
The emphasis is on identifying performance attributes wanted from the supplier and managing those aspects of the relationship. Opportunity sourcing number 7 is the practice of scanning a supply market without a current need to source. This is a pure-discovery initiative to identify what is out there and determine what might be useful in an innovation or new application.Supplier relationship management (SRM) - explained
Such individuals often sit within the business unit that interacts most frequently with that supplier, or may be filled by a category manager in the procurement function. This role can be a full-time, dedicated positions, although relationship management responsibilities may be part of broader roles depending on the complexity and importance of the supplier relationship see Supplier Segmentation. An executive sponsor and, for complex, strategic supplier relationships, a cross-functional steering committee.
The seven facets of supplier relationship management
Effective governance should comprise not only designation of senior executive sponsors at both customer and supplier and dedicated relationship managers, but also a face-off model connecting personnel in engineering, procurement, operations, quality and logistics with their supplier counterparts; a regular cadence of operational and strategic planning and review meetings; and well-defined escalation procedures to ensure speedy resolution of problems or conflicts at the appropriate organizational level.
Further, suppliers can be segmented by the degree of risk to which the realization of that value is subject. Executive-to-executive meetings Strategic business planning meetings, where relationship leaders and technical experts meet to discuss joint opportunities, potential roadblocks to collaboration, activities and resources required, and share strategies and relevant market trends.
Joint business planning meetings are often accompanied by a clear process to capture supplier ideas and innovations, direct them to relevant stakeholders, and ensure that they are evaluated for commercial suitability, and developed and implemented if they are deemed commercially viable.
Operational business reviews, where individuals responsible for day-to-day management of the relationship review progress on joint initiatives, operational performance, and risks.