A typical supplier relationship management (srm) application is ____________________.

Almost everyone has heard of that old adage “Customer is the King”. Therefore, most companies pursue Customer Relationship Management (CRM) with a zealous passion. They have structured programs and departments in place and invest large amounts of money on CRM software packages. CRM is indeed a very important function as Customers are extremely vital to a company’s growth and profitability. However, there are two sides to every coin. Just as Customers are critical to a company, so are the Suppliers. Suppliers are required to provide the inputs that enable a Company to deliver the products and services to its Customers in a timely manner. A Company cannot survive for very long without a base of strong and well managed Suppliers. Supplier Relationship Management (SRM) is just as important to a company’s growth and profitability as CRM. And yet, most Companies either have a very basic SRM program in place or do not have one altogether. Before getting into the importance and merits of having an SRM program, let’s first understand what is SRM.

In a changing marketplace, the role of supply chain has shifted from being viewed simply as a cost centre to being viewed as a strategic contributor towards the organizational goals. Organizations are moving towards aligning their supply chain management function with other strategic business functions in the pursuit of achieving the organizational goals and best-in-class status. In order to make the supply chain robust and improve its operational efficiency, it is critical to collaborate with suppliers and identify innovative ways to leverage assets and operational capabilities.

SRM is a systematic approach to effectively manage and develop long-term mutually beneficial relationships with suppliers that enable value creation/enhancement over the life of the contract. Supply chain management uses SRM in procurement, operations, and project management. SRM helps foster positive relationships with your suppliers and helps guide the activities you should engage in with each supplier. It works much the same way as CRM does on the front-end, dealing directly with customers.

The main goal of SRM is to help a Company become the ‘Customer of Choice’, especially for its strategic suppliers. It helps improve business processes between the Company and its Suppliers and provides a consistent way of interacting with and managing suppliers that promotes collaboration and continuous improvement from the supply base. A comprehensive SRM program can offset supply chain risk, increase the top-line, enhance supplier services and support, and maintain and improve upon the value acquired during original sourcing events.

So where does SRM fit in the Strategic Sourcing process? The picture below illustrates a typical Strategic Sourcing process. SRM is a subset of the strategic sourcing process and is a key activity in the “Manage” chevron. 

Objectives of SRM

Developments in the business environment have become much more difficult to anticipate due to globalisation, more demanding customers, shorter product lifecycles, increased outsourcing and continuous pressure on costs. Consequently, procurement and supplier management have become more important and strategic. As mentioned earlier, the key objective of SRM is to become “the customer of choice”. In addition to this, there are several other objectives of an SRM program:

• Leverage supplier capabilities
• Increase the responsiveness of the supply chain
• Enhance supplier relationships and guarantee sustainable sourcing
• Manage the supply risk profile and improve security of supply
• Deliver on cost reduction targets
• Better manage price volatility

Benefits of SRM

Every organization is plagued with numerous challenges on the procurement and sourcing side. These challenges cover a wide spectrum of issues ranging from higher procurement costs to supply risk / disruptions. A robust SRM program will help organizations mitigate or even eliminate some of these challenges altogether. Following are some of the benefits that can be realized through a good SRM program:

• Cost and value optimization
• More efficient processes
• Reduction of inventory
• Better access to technological innovations
• Higher responsiveness to customer demand
• Improved on-time delivery
• Assurance of supply
• Better quality assurance and control
• Better access to new products/markets
• Positive impact on HSE
• Better management of disruptive events in the supply chain

Enablers for a Successful SRM Program

SRM involves cross-functional teams from both the buyer’s and supplier’s organizations. If not implemented efficiently and effectively, SRM can turn into a tedious and chaotic process. To avoid this, it is important to ensure that the enablers listed below are fully aligned to implement a successful SRM program.

• Goals – SRM should have clearly defined goals, which need to be aligned with the goals/objectives of the organization.
• Roadmap – Both organizations should have a clear roadmap for the program to achieve the defined goals.
• Communication – Raise awareness about the goals, roadmap and long-term benefits to the organization. Market SRM as an initiative that requires proactive participation and involvement of cross-functional stakeholders.
• People – Ensure that people have the knowledge and skills to establish and manage a SRM program
• Governance – Clearly define roles and responsibilities along with a robust governance structure.
• Technology – select the right technology partner for efficiently deploying a SRM program

SRM Process Framework

Anklesaria’s process for implementing a successful and robust SRM program involves 5 main steps with activities under each step. This process helps build an understanding about the supplier’s business, identify common business goals/ KPI’s with the supplier, develop engagement plans specific to each supplier, implement collaborative action plans, review the SRM performance, address issues and realign SRM goals for future.

Do leave a comment letting us know what you think about SRM and its importance in today’s business environment. For more interesting updates, offerings and courses on SRM, kindly follow us on Linkedin and visit our website www.anklesaria.com 

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