Supplier relationship management (SRM) is an integrated approach that addresses and provides benefits for both the buyer and seller sides. It should be noted that not all suppliers are the same, so not all customer-supplier relationships should be dealt with through a single strategy. The typical goal of supplier relationship management is to streamline and improve processes between a buyer and its suppliers. It is all about developing a mutually beneficially relationship with suppliers, especially those deemed as most strategic to the brand, to promote quality, efficiency, and innovation among several other benefits. As with many procurement activities, at the most basic level, supplier relationship management can be used to reduce both prices paid and costs to the organization. Developing appropriate styles of interaction can also make it is possible to save money. The key to developing an effective supplier relationship management approach is a well-understood supply base.

Strategies for better supplier relationship management

Leverage technology

Investing in a good supplier management software helps companies keep track of information about their suppliers in one place. Companies can also take one step further and install an advanced purchase order management software which is useful in creating, processing, and tracking purchase orders with the suppliers.

Ensure timely payments

Fulfillment of payments on time is a vital element of an effective supplier relationship management. This is also a critical step in ensuring that the company’s valuable suppliers are not lost. Timely payments also facilitate companies to establish their credibility and reliability as a customer to their suppliers. Just like companies like to receive prompt delivery of goods and services from the suppliers, the suppliers expect prompt payments. In case companies are unable to make payment on the date agreed, then they must inform the supplier as soon as possible with the date on which they can expect the payment.

Make detailed agreements

Supplier relationship management is a non-negotiable in the case of companies that buy from a vendor on a regular basis. Begin by listing out what both parties expect from the partnership such as item or service description, price, delivery terms, payment terms, and communications. Then have both parties sign it. The complexity of this document depends on the business requirements. A well-documented supplier relationship agreement reduces the possibility of confusion or disputes and paving way for better supplier relationship management.

Evaluate risks

One of the crucial factors in supplier relationship management is to evaluate the risk involved, especially if the company has a complex supply chain. Ask the supplier for references, examples of their previous work, years in business, areas of expertise, and how they deal with a crisis. This helps businesses understand the credibility of their suppliers. It is also essential to ask critical questions such as – Are they competitively priced? Do they have the right experience? Do they have the capacity to deal with the various scale of orders? Are they financially stable? Maybe the supplier selected is not the cheapest but guarantees 100% on-time delivery with a money back offering; businesses can live with that because a chain is only as strong as its weakest link, and if the vendor lets the company down then their whole supply chain may be at risk, then it can affect the company’s ability to deliver to the customers.

Know more about SpendEdge’s supplier relationship management solutions