What is supplier relationship management and why is it important?
Supplier relationship management is widely implemented in procurement, operations, and project management to improve operational processes, maintain a congruent supply chain, and develop mutually beneficial relationships. Fostering positive relationships with suppliers is imperative to maintaining sustainable growth, establishing dominance in the market, and overcoming various industries’ challenges. Supplier relationship management typically involves systematic evaluation of suppliers, determining their value to the organization, developing strategies to improve performance and relationships. Maintaining supplier relationships that add value to the organization requires identifying, evaluating, and cultivating improved dynamics. The absence of proper SRM may lead to the disruption of supply chains, delayed launches, regulatory compliance challenges, and an overall decline in performance, brand image, and sales.
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Best Practices to Optimize Supplier Relationship Management
Conducting data-driven supplier identification
Suppliers are long-term partners and choosing the ideal suppliers should be an equally stringent and challenging task. To ensure your organization is working with the best, the procurement team must identify, evaluate, and approach suppliers that follow similar professional values, aim for similar objectives, and work along with similar ethics. Supplier identification can serve as a differentiator between failed vendors and successful, sustainable partnerships, enabling a future of efficient business deals, long-term growth, and mutually beneficial strategies.
Setting up detailed objectives
Organizations require detailed objectives to maintain targeted activities and achieve various business goals. Similarly, maintaining a clear set of objectives while identifying, partnering, and working with suppliers enables clarity, efficiency, and coordination of end targets. If your suppliers and organization aim towards the same goals, there is a higher chance of sustainable congruence, long-term success, and improved performance. Similar approaches to the same targets can also minimize disruptions to the supply chain, help mutually overcome challenges, and promote major business goals.
Follow definite processes
While setting objectives is necessary, determining a mapped-out path to achieve said goals and definitive processes can easily attain challenging objectives. When developing and maintaining supplier relationships, creating mutually beneficial or mutually exclusive processes that lead to the same targets and goals can help your organization and suppliers determine and execute all required activities to achieve all targets. Additionally, following definite processes helps establish clear timelines, overcome minor discrepancies, and ensure higher productivity.
Develop effective communication skills
Viewing suppliers as partners and not simply vendors is imperative to maintaining effective relationships. Supplier relationship management requires illustrative communication, transparency, clarity across the supply chain, and all interactions. Establishing a mutual understanding, determining clear goals and processes, and coordinating to execute the same efficiently can foster equal, robust, and sustainable relationships with your suppliers. Promoting clear communication across various levels and developing an effective communication skill set can help your organization ensure a positive relationship with suppliers.
Aligning business objectives with supplier relationship management strategy
To avoid unnecessary expenditure on initiatives that may not promote growth in the company, it is crucial to ensure that your supplier relationship strategies align with major business strategies and plans. Failure to do so may lead to supplier relationships shifting from focus and the lack of highly necessary mutually beneficial partnerships with your suppliers. Alignment between business strategies and supplier relationship strategies can help with major processes such as entering new markets, improved product development, better working capital productivity, and mitigating various supply risks.
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Supplier relationship management for a leading telecom industry client
Challenge: The client, a leading player in the telecom industry wanted to re-evaluate the cost structure by exploring alternative supplier to reduce costs while maintaining the same quality.
Benefits offered: Helped the client gain accurate picture of the entire supply chain, which enabled them to shift to a competitive pricing model with re-established supplier relationship management.
Creating an effective supplier relationship management process is crucial for companies to develop successful purchase strategies. Stay ahead by requesting service on our procurement platform to gain the latest insights into supplier management to fulfil the business objectives of your organization.
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