With the increasing preference for outsourcing non-core competencies, organizations have started to realize that they are becoming increasingly reliant on suppliers. They rely on suppliers in terms of innovative power, security of supply, corporate social responsibility, and on-going cost savings. However, many organizations still fail to realize the true importance of supplier relationship management (SRM), leading to functional incompetencies. Through this blog, we have covered the key supplier relationship management benefits that companies could reap by understanding the real importance of supplier relationship management.
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Importance of Supplier Relationship Management
Supplier relationship management helps align businesses appropriately with suppliers. It focuses on what is critically important for businesses and helps them develop a supplier relationship management framework to collaborate with suppliers. Supplier relationship management is a systematic approach for developing and managing partnerships that are focused on joint growth and value creation. Additionally, it helps companies to better associate with the limited number of key suppliers based on trust, open communication, and empathy to achieve supplier relationship management benefits.
Supplier Relationship Management Benefits
This one of the major supplier relationship management benefits that companies aim to achieve. Improving relationships with suppliers helps companies to address delays in the supply chain process. Suppliers also gain a better understanding of the business they are collaborating with; thus, boosting efficiency.
Engaging with new suppliers involves significant costs. By better understanding supplier relationship management benefits, companies can easily eliminate many of these costs. Building mutually beneficial relationship with key suppliers helps companies to minimize costs, reduce delays, and quality issues. Furthermore, it helps identify cost savings opportunities in the supply chain and the quality of supplier output; thus, improving the consumer services they offer.
Drives greater value
One of the key supplier relationship management benefits is its ability to help companies gain detailed insights into the lifecycle of suppliers and analyze their performance. This helps them identify key areas of improvement and devise strategies to drive greater value from their existing suppliers. Continuous process improvements through long-term relationships with suppliers helps in the creation of a more effective and efficient supply chain.
Mitigates supplier risks
Mitigating supplier risks is one of the unequivocally critical supplier relationship management benefits that businesses need to achieve to sustain themselves in the long term. With the growth of organizations, supply chains and the resultant supplier relations becomes complex; thus, increasing the likelihood of detrimental supplier risks. In such a scenario, understanding the importance of supplier management enables companies to identify and assess the impact of supplier risks and proactively devise risk mitigation strategies. To gain detailed insights, request more information here!
Supplier Relationship Management Benefits: Steps to Achieve True Efficiency
There is a growing realization among companies that they have not been able to fully understand the importance of supplier relationship management. As a result, they miss out on opportunities to improve their offerings. Also, to help companies move from realization to action, we suggest that they take a transformational approach, which considers the value potential, complexity, number of stakeholders, and organizational impact. Although, establishing an effective supplier relationship management process is difficult, businesses can start by building a supplier management framework. Typical activities that will help companies to reap supplier relationship management benefits include:
- Analyze current supplier management programs, including strengths and improvement opportunities.
- Formulate strategies to streamline SRM initiatives with business objectives.
- Creating business cases to calculate/estimate the ROI.
- Selecting a pilot project with key suppliers of the company.