Suppliers are major players in any supply chain. As a matter of fact they are one of the first stakeholders. Your choice of suppliers affect your bottom-line and reputation. You want to know how? Let’s go.
Firstly, suppliers affect your bottom-line because of the prices they quote. Remember cost minimisation for profit maximisation?
Secondly, suppliers affect reputation because of the quality of goods or products they supply in quick time. Quality raw materials ensure exceptional finished goods and using quality finished goods will make customers happy. Reputation also makes marketing and growth easier.
So now, what is SRM? Supplier Relationship Management. It is the strategic approach of managing and evaluating the interactions, contributions and value which suppliers add to an organisation
Now back to this stakeholder talk, it is important to organise internal stakeholders in the overall SRM process and ensure a win-win position at all times. A sustainable relationship is a mutually beneficial one where both parties add value and are relevant to each other. Building long-term supplier relationships is a key aspect of strategic procurement.
Many things make SRM successful. However, I will mention 3. Communication, Effective communication and More Effective Communication. Haha. Got you! But look at this. Goods flow from supplier to customer. Payment is from customer to supplier. But communication goes both ways.
What exactly can organisations use to track supplier performance? Let’s go back to what we considered before selecting them. We examined cost/prices, quality of goods, delivery lead time, delivery terms, geographical location, shared culture/service levels, supplier capacity and risk analysis
So it will make so much sense to track all these from time to time won’t it? It sure will.
Let’s see supplier and buyer challenges
Supplier- Buyer Challenges
• Low quality of goods
• Communication gap
• Inconsistency
• Non-transparency of processes
• Poor culture alignment
• Relationship is not mutually beneficial
• Poor Supplier financial capacity
• Macroeconomics
I have mentioned challenges that many professionals face with their suppliers at the moment but then how about some good news. We know we all love good news. So…
What are the advantages of implementing an effective Supplier Relationship Management (SRM) process?
• Tracking Supplier Performance is easier
• Good cost savings and price volatility mitigation
• Value assessment – we begin to understand how competitive they make us
• Strategic Integration and Collaboration – Up to date communication and Collaborative planning, forecasting and replenishment (CPFR) and process re-engineering. The CPO agenda magazine suggests that this has unlocked savings in Fortune 500 firms.
