The procurement function over the years has seen tremendous evolution and growth. Although planning and inventory management still remains the crux of this function, in today's era, much of the focus has been shifted toward vendor and supplier relationship management (SRM).
As a result, the role of the procurement department is expanding significantly while stressing better supplier collaboration, straightforward communication, and alignment of interests. All these flexible, agile, and integrated supply chain parameters satisfy the dire need for creating world-class supplier relationship management.
A well-managed supply chain starts with well-managed supplier relationships.
An organization with a supplier relationship management strategy cannot only optimize and streamline its supply chain but also experience a drastic improvement in its ROI and time-to-market.
A few examples of successful organizations seamlessly beating their competition due to their strong supply chain and well-managed supplier relationships are Toyota, Honda, Brose Fahrzeugteile, and Procter & Gamble.
How to Build a Robust and Well-managed Supplier Relationship Management Program
The complexity of the supply chain ecosystem is growing day by day. Hence organizations need to evaluate their suppliers' contribution to their overall business success. To keep the momentum and support from suppliers moving, they need to have strong relationships with their suppliers. Here's how to achieve excellence in SRM.
Encourage Innovation
Benefit: Excellent supplier relationship management opens up the potential for innovation that positively impacts your business and your suppliers in the long run.
How? A boost in supplier innovation results in better-than-ever SRM. Better SRM helps drive innovation and creates long-term value for you and your suppliers' businesses. To achieve this, organizations need to effectively engage their suppliers in innovation programs and share the right information at the right time to ensure strategic alignment.
Clean, clear, consistent, and connected supplier information is essential for effective supplier management.
Prioritize Value over Price
Benefit: Procurement from reliable suppliers who provide timely and quality goods and services regardless of the price minimizes supply chain delays.
How? Provided your financial flexibility permits it, always focus on what you will get over what you pay. Getting high-quality goods or services at a fair price is the best way to increase your revenues. So even if your budget is a little tight, always prioritize quality over quantity. You can sometimes buy in bulk and save dollars in discounts. If you stick to good suppliers, you can be assured of your business remaining in safe hands. Consistent suppliers are directly proportional to a constant supply chain.
Establish a Mutually Beneficial Relationship
Benefit: The relationship gradually evolves to a point where the business also outsources non-core operations to the supplier, such as inventory management and some customer support, resulting from mutual understanding and trust.
How? Communication is the key to winning the trust and building a mutually beneficial relationship. You need to be very frank and open about your requirements with the supplier. This includes discussing alternatives if and when things do not go as planned.
On the other hand, even if your supplier is financially and technically capable of fulfilling last-minute requirements, avoid rush orders. There are better ways to work since rush orders might break the trust of existing suppliers and taint future relationships with potential collaborators.
Onboard the Right Suppliers
Benefit: Creating a positive vendor onboarding experience instills confidence and partnership in your vendor and sets them up to work for your mutual success.
How? Supplier relationship management starts with the onboarding of suppliers. Onboarding and dealing with the right suppliers can achieve long-term cost savings by reducing issues with availability, quality, and delays in supply. Onboarding experience on either end sets the tone of your entire relationship.
Signing off
Supplier relationship management is not a one-off activity; it's an ongoing process that needs to be optimized, monitored, and managed across vendor lifecycle management to minimize supply chain disruption and ensure business continuity.
A "Normal Supply Chain" is "Unlikely" in 2023 Unless you have a robust Vendor Management Solution that meets supply chain needs while unlocking efficiencies and savings for your business. Learn more in this on-demand webinar!
