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Supplier Relationship Management: Building Strong Partnerships for Efficient Procurement

If you enjoy good meals and soft drinks at home, has it ever crossed your mind how they all come together or when shopkeepers get them? This is where supply chain management comes in, which depends on SRM (supplier relationship management).

What Supplier Relationship Management Is

Supplier relationship management refers to managing and interacting with third-party businesses that provide services, materials, and goods to your business organization. This sounds easy – you pick a cost-effective supplier to maximize the business relationship’s value.

Of course, similar to many modern business practices, it is more complicated than this. Thanks to technological growth and economic scale, SRM has undergone major transformations in the past few years.

According to experts at Gibson Consulting, using emerging practices to streamline systems used in supplier management may come in handy.

Types of SRM

  • Subcontracting/outsourcing
  • Strategic alliance
  • JIT (Just in Time)
  • Partnership
  • Arms-length

Importance of SRM

In the modern era of the supply chain, procurement is becoming complex, with many suppliers being used by one business organization to manufacture products.

With the increased pressure on the supply chains to minimize customer costs, it is challenging to maintain a healthy margin. Business organizations should use systematic approaches to keep efficiency and profitability at their peak. This way, supplier relationship management comes in handy by reducing costs and managing risks.

By cooperating in mutually beneficial relationships with the key vendors, a business organization may strive for cost savings in the long term. A healthy working relationship with a supplier won’t just deliver cost savings. It will also minimize quality issues, delays, and availability problems,

Procurement options are also exposed to different risks, including financial instability and chain disruptions. By establishing a strong relationship with vendors, business organizations will mitigate those risks by working hand in hand to identify risks as well as develop a contingency plan. This, in turn, enables organizations to respond to unexpected events quickly.

How to Use SRM

Implementing SRM may seem daunting. However, it would be vital for success in the long term. To begin with, identify supplies and develop a clear objective for that relationship.

Afterward, you have to establish a solid communication plan outlining how you can maintain regular contact with suppliers. This must include site visits, conference calls, and scheduled meetings.

It will also be best to have a good system in place to monitor the performance of suppliers. This may involve using software tools or KPIs that track metrics like quality ratings and delivery times.

Another important aspect of using SRM is to develop governance structures, which define responsibilities and roles in the organization. You have to assign dedicated resources responsible for managing relationships with suppliers continuously.

Don’t forget the importance of training works on the best practices of SRM. Providing support and education around relationship-building strategies and effective communication practices will ensure everyone is aligned with your organization’s goals for a successful supplier partnership.

The Takeaway

SRM solutions are not just negotiating tools. They will also enable business organizations to plan SRM to improve their business’s profitability. Hence, to improve your existing SRM processes, you must invest in the right SRM system.

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