What is Supplier Management Relationship (SRM)? And Why Is It Important?
Supplier Relationship Management (SRM) is an organized enterprise-wide assessment of suppliers’ assets and capabilities in light of the organization’s overall business strategy. It is a determination of what activities to engage in with different suppliers, and a coordinated planning and execution of all interactions with suppliers across the relationship life cycle to maximize the value realized through those interactions.
The supplier relationship management approach focuses on building two-way, mutually beneficial partnerships with strategic supply partners. This partnership provides more innovation and competitive advantage than operating independently or through a standard, transactional purchasing arrangement.
The SRM discipline aids in determining the value that each supplier delivers, as well as which ones are the most crucial to the business’s continuity and success. It also allows managers to develop stronger relationships with suppliers depending on the relevance of each one.
Supply chain specialists that contact with suppliers on a regular basis in areas like procurement, project management, and operations use supplier relationship management.
As buyer-supplier networks become more global and intertwined, and firms rely more heavily on crucial suppliers, supplier relationship management has become increasingly important. SRM establishes a framework for identifying and organizing strategic supplier partners as well as the relationship lifecycle.
What Is the Importance of Supplier Relationships?
Supplier connections can make or break a firm in a competitive market, therefore it’s crucial to understand how your suppliers see your company. Having dependable and trustworthy suppliers:
- Time-to-market is ensured or reduced.
- Ensures that the best terms/price/value are obtained for the products and services required.
- Ensures availability of its own products and services, which has an impact on corporate revenue.
- By offloading non-essential activities/products, it is possible to focus on core innovation and strategies.
The Goal and Aim of Supplier Management Relationship (SRM)
SRM aims to simplify and streamline operations between a buyer and his or her suppliers.
Buyer Connection Management focuses on establishing a mutually advantageous relationship with suppliers, particularly those considered to be the most strategic to the brand, in order to increase quality, efficiency, innovation, and other benefits.
Supplier Relationship Management is concerned with assisting in the development of positive buyer-supplier relationships and determining which activities to pursue with each supplier.
The following are the goals and aim of Supplier Management Relationship;
- Develop Great Supplier Relationships
- Help optimize the Value Chain
- Helps in Supplier Risk Management
Supplier Management Relationship (SRM) Processes
Strategic sourcing processes for SRM can differ from one firm to the next. SRM, on the other hand, usually follows a three-step process.
Supplier segmentation is the process of categorizing suppliers into various categories in order to allocate limited resources to efficiently manage them. It’s a key component of a supplier relationship management (SRM) strategy.
Develop and Implement a Supplier Strategy
There are six Strategies Suppliers Can Use and they include;
- Prioritize your people.
- Pay attention to your customers.
- Reduce the amount of time it takes to complete a task.
- Have a plan and understand your vision.
- Customers can benefit from your expertise
- Market to OEM Clients How you handle risk
SRM Features Include;
|Performance assessments||SRM programs will allow the user to utilize key performance indicators (KPI) to perform quality assessments and a thorough awareness of deviations.|
|Risk assessments||Scorecards enable supplier segmentation by user-defined risk variables, helping determine which partners present the least risk in the most important areas.|
|Centralized sourcing & collaboration||SRMs use a centralized information database to streamline bidding, consolidate and distribute contracts, track compliance and improve collaboration.|
|Regulation compliance||High-quality SRMs use rules engines and compliance scorecards to reduce the burden and improve the success of compliance protocols.|
Supplier Management Relationship (SRM) Software
To improve supplier cooperation planning and management, SRM software centralizes supplier-related data, assists in the selection of suitable suppliers, analyzes their performance, and detects related risks.
SRM Software’s Financial Results
- The most cost-effective sourcing and purchase options are identified.
- Improved ties with suppliers and collaboration with sub-suppliers result in better pricing and delivery terms.
- Compliance and regulatory risks in the supply chain are reduced.
- As a result of the optimization of the sourcing strategy, the quality of the goods/services has improved.
Example of Supplier Management Relationship (SRM) Software
Epicor procurement is an SRM solution that capitalizes on the purchasing team’s success in negotiating contracts and creating policies across the organization.
Epicor Procurement software helps you save time and money by automating the whole purchasing process.
- Employee self-service is convenient and efficient.
- Workflow automation to expedite approvals.
- Back-office software are seamlessly integrated.
- Catalog management and policy enforcement are completely in your control.
- Building collaborative supplier connections in a strategic way.
- Cost savings that have a direct impact on the bottom line.
- Epicor SRM is an all-in-one solution that provides reach, speed, and control.
- With less effort on everyone’s side, you can better control who buys what and when.