As trendy as SRM became in recent years, only a few companies have integrated it into their procurement organization. Those who practice SRM agree that stronger ties between business partners create new growth opportunities. But what is SRM and how does it help your interests?
Supplier relationship management (SRM) is about strategically planning and conducting conversations that promote collaborative business relationships designed to create value, drive continuous improvement, and reduce the risk of failure for participating stakeholders. Those organizations which practice SRM commonly nominate a Steering Committee to drive the overall strategy and assign an SRM coordinator to facilitate the process. Typical planning aspects include Supplier Segmentation, SRM Governance, Performance Management, and Supplier Development.
Improving Business Relationships
Global companies find the SRM approach an effective tool to drive a common business framework across regions where business challenges may differ within various geographic regions. When implemented correctly SRM processes lead to optimized service and an improved customer experience.
One of the first challenges that a company considering SRM will face is determining which KPI's are applicable to the supplier for evaluating supplier performance. For those companies competing in the area of supply chain management, frequent SRM meetings are appropriate, as business partners must evaluate performance, make corrections, and prepare for the next opportunity.
Collaboration across traditional functional boundaries is also critical as success requires Procurement, Finance, Operations and IT to work together toward common business objectives.
Benefits of SRM
A strong SRM process is critical to companies managing many suppliers across complex supply chains. The SRM approach aligns key values including continuous innovation and building trust and executive-level engagement that promotes collaboration among all stakeholders is encouraged. Lean methods and tools identify opportunities where companies can then invest in solutions that promote sustainable improvements. The SRM approach is a mutually beneficial, win-win methodology that helps companies and their suppliers grow.