Supplier Relationship Management is an important way to drive competitive advantage. It’s just as important to extract the best from key partners as it is to get the best from your employees. Continue reading for the top 10 musts for supplier relationship management.
What is Supplier Relationship Management? Companies like Toyota, excelled in supplier management, leading to a competitive advantage that converted a small regional manufacturer into the largest automotive company in the world. Supplier Relationship Management is a convoluted thing involving assessment, advanced evaluation and subsequent action planning to continuously optimize long-term strategic supplier relationships. There are various models for Supplier Relationship Management, all requiring mutual respect, trust, fairness and honesty through a shared understanding of the mutual benefits of being partners in business. Here are the must do’s to get your Supplier Relationship Management process delivering value.
Process of Supplier Relationship Management
1. Foster the right behaviors
Companies must ensure that both buyers and suppliers behave in a way which is amenable to the creation of a productive relationship. It is the responsibility of both sides to foster good behaviors in order to ensure a win-win situation. For instance, opportunistic activities and slow delivery or reactions on either side may indicate that they are not sufficiently invested in the relationship.
2. Get the most out of strategic suppliers
It is important to understand that strategic suppliers are not like conventional vendors. They cannot be managed on mass simply through auction systems or subjected to blanket demands for price reductions. These relationships require time and trust. As such, the essential buyer investment into the relationships should be reciprocated with a diverse array of supplier benefits. For example, in terms of product innovation, risk reduction projects and even re-engineering supply systems can be outputs for successful strategic supplier relationships.
3. Practice Effective Communication
Keeping channels of communications open and strong will help to keep you and your strategic suppliers on the same page. There needs to be transparency in each other’s operations to build trust and understanding in the partnership. Moreover, it also helps to understand their language and culture to avoid any communication breakdown.
4. Create a Solid Agreement
One of the most essential steps in Supplier Relationship Management is to always ensure that you and your suppliers agree on a clearly crafted contract where terms and responsibilities are defined. This should be done before finalizing your strategic supplier partnership. Such action will eliminate any conflict or disagreement if any problems occur.
5. Follow a Supplier Relationship Management Program
Similar to any other aspect of your business, strategies are required for a structured relationship with your suppliers. The key is to treat them fairly and not to abuse your power as a buyer. It is important to determine the Supplier Relationship Management strategies which must be measurable and achievable within an agreed time frame; list the activities and milestones necessary to achieve those goals.
6. Performance Management
An effective Supplier Relationship Management Program should include defined processes to manage performance. For instance, involvement of the highest executive level is key to the ongoing success of the SRM program. Executives may only meet quarterly to discuss strategy while lower levels are involved in tactical operations and may interface with suppliers on a daily or weekly basis to manage the business. Obtaining inputs from different management levels will ensure that the SRM program will work successfully on a day-to-day basis while continuing to evolve and address the long-term goals of both parties.
7. Offer Innovative Training
When establishing an SRM program, training is necessary to educate the organization on its benefits and role in optimizing business operations. Every employee involved must be trained on how to use tools to ensure successful program execution. An innovative and engaging training program will greatly help this desired outcome. For instance, at Skill Dynamics, employees are trained according to their roles using modern e-learning tools such as scenario-based training. The “real-life” scenarios, not only make the training more relatable but prepares learners for the challenges in their “real-life” futures.
8. Address Any or All Roadblocks
It is essential to discuss with your suppliers any possible barriers. Establish “Roadblock Busters” on both sides of the partnership. These are relatively senior people who can make decisions that will remove the barriers whilst protecting the interests of both parties by exhibiting fairness and trust. Anything that hinders your supplier relationship has the potential to slow or stop your operation and erode the trust and respect that is essential. You must avoid this as much as possible, so don’t ignore any known barriers and react quickly to avoid them taking hold.
9. Realize that Timely Payments are Crucial
Paying your suppliers on time will ensure that you don’t lose them. In this way, you will prove that you are a reliable customer and you’re easy to work with. If it happens that you cannot make the payment on an agreed date, inform the supplier as soon as possible with the date on which they can expect the payment. Just keep in mind that suppliers will appreciate timely payments just like you like timely actions on their side.
10. Stay Up-to-date with Technology
There is no doubt that technology can simplify the whole process of Supplier Relationship Management. Having a system in place will make it easy to view your suppliers and analyze all of the risk factors. Hence, using SRM technology provides you with full and unparalleled visibility into your supplier base, giving you a detailed picture of what is impacting your data supply chain and making it easy to mitigate the risk.
Supplier Relationship Management – best practice
Effective Supplier Relationship Management allows you to save time and money and leads to big opportunities. The key is to follow the essential strategies which will allow you to develop a lasting relationship with your suppliers. Having a strategic SRM program in place, can help you eliminate supply chain risk, improve supplier services and support, and even increase organization revenue growth.