The term “supplier relationship management” (SRM) refers to the practice and process of interacting with suppliers. It is the development of relationships and positive interactions with suppliers for the mutual benefit of your company and the supplier.

Most businesses view SRM as an organized approach to understanding and defining what they need and want from suppliers and establishing and managing the procurement to sales relationship. The key to successful SRM is the ability to maximize the value of every interaction and create closer and collaborative relationships that reduce risks, improve effectiveness and increase profitability.

Components of SRM

SRM necessitates a systematic and business-wide assessment of your suppliers’ assets and capabilities so you can improve your overall company strategy to deliver greater levels of innovation and competitive advantage that could not be achieved independently. Effective SRM requires your business to establish a consistent and efficient approach to your supplier interactions that includes two key components: organization and engagement.

Organization

There is no definitive organization for deploying SRM that fits every company and organization level; however, there are a few elements that are relevant no matter the size or layout of your business.

  • A Formal SRM Team: An SRM team can help you facilitate and coordinate activities and interactions with your suppliers. Your team should have a mix of commercial, technical and interpersonal skills and the ability to communicate, listen, influence and manage change while developing strong relationships built on trust.
  • A Relationship or Supplier Account Manager: To effectively manage your suppliers requires an individual who will be in charge of most procurement interactions and will be responsible for developing each relationship. They must be able to understand their suppliers’ business and strategic goals and to match those with your company.
  • An Executive Sponsor and CrossFunctional Steering Committee: SRM also requires an individual, or team of individuals, who can develop the link between SRM strategies and overall business strategies to prioritize goals and optimize supplier impact.

Engagement Model

Managing your suppliers by strengthening your relationships can make or break your business. There’s typically a three-tiered engagement model that fits each supplier: strategic, preferred and approved. How your suppliers fit within the model will change how you interact and communicate.

  • Strategic: The strategic level is a long-term business commitment with a formal supply agreement in place. It requires strong executive-level engagement and cooperative strategic planning.
  • Preferred: This is an ongoing supplier-customer relationship with a formal agreement in place and a steady supplier and sales relationship. It only requires some executive engagement and regular business reviews.
  • Approved: This is a transactional buy-sell relationship where suppliers are part of an approved supplier list, and suppliers at this level most often deal with your SRM team or Supplier Account Manager.

Why Does SRM Matter?

A mutually beneficial relationship, based on trust, can help your business experience a higher success rate, decreased risk, and improve innovation, quality, reliability and cost/price reductions. SRM helps to streamline your business. Supplier relationship management is not just another annoying tech platform, but a valuable tool to help simplify managing relationships with the suppliers that help your business run effectively. SRM is a core process for successful procurement and supply chain organization.

SRM is about identifying and measuring suppliers via oversight, measurement and management. The closer and more collaborative your relationships, the more benefits your company and supplier will realize. Effective SRM will not only deliver profitability, but new opportunities for success.
To learn how you can improve your SRM, take a look at Vroozi’s Mobile Procurement and Catalog Management platforms.