Supplier relationship management (SRM), along with partner relationship management and employee relationship management, is one of three new ways that businesses have adopted to create outstanding relationships for all parties involved to make the business more beneficial. SRM is used by analyzing all variables, such as strategy, business goals, prices, and markets, which then allows the company to determine the best supplier to work with and create a relationship with.
SRM is done by constantly evaluating and categorizing all suppliers involved with a business to optimized supplier selection and create the best possible relationship with all parties involved.
When the business has contracted a supplier it is crucial to preserve and evaluate the new relationships to guarantee that the contract is upheld and beneficial to the company.
In highly competitive markets businesses are looking for innovative ideas on how to decrease costs and increase efficiencies. SRM has been a successful tool in supply chain management, which helps businesses understand and contribute to suppliers in all areas.
If SRM is not continually performed this can be detrimental to the company and cause many problems within the business and their suppliers. With a decrease in relationship structure this will lead to an impact on cost and flexibility to adapt a fluctuating market.
There are numerous publications that relate to effective SRM. All of which include a set of key modules or building blocks for a successful business. These are:
· Integration and Segmentation
Integration and Segmentation
A company’s internal structure is a crucial part to the success of the SRM process. In order to have a successful SRM process all suppliers must be integrated into the same system throughout the internal structure. With integration there must be strategic segmentation of all suppliers using SRM. Traditionally integration and segmentation have four common categories:
Suppliers need to be involved in the business and should be able to access the businesses operations. This involvement should be straightforward, easy, and relatively cheap. The supplier should have the knowledge of cross-functional working tactics, contractual expertise, and market knowledge. Along with SRM, companies are suggested to set up a supplier account management process that deals with the involvement of the suppliers. A well connected supply chain between manufactures and suppliers will help lower costs and increase productivity by accessing real time market data.
Using SRM requires the use of technology to analyze opportunities of greatest supplier organization and performance monitoring. Business intelligence tools are beneficial for both parties involved and can even increase profits. Business activity monitoring is a vital tool to detect whether the company is using resources, such as money and effort, in the most productive way. By using technology, calculations and solutions of loss of resources are more easily found.
Well managed supplier relationships help businesses expand and create new competitive advantages without losing costs. If done properly this can lead to growth and profit, but if done incorrectly can lead to increased costs and decreased productivity. Top management is crucial to the businesses structure and organization. This allows for the building of strong partnerships which in turn allows all companies involved a greater financial success.