Top five things on managing suppliers effectively

Supplier relationship management (SRM) is all about supplier-engagement, and effectively maintaining the relationship between supplier and customer organization to create mutual value.

It is a business process, which recognizes that not all suppliers are the same, meaning that each supplier-relationship should be dealt with a unique strategy. To succeed in SRM, companies should consider five key steps that are listed below.

The first step to successful supplier relationship management is to find potential suppliers. Focus SRM efforts on suppliers with greatest potential to create value and to reduce risk. When finding these suppliers, you should look beyond strategy and financial fit. You should consider corporate culture, operating models and business practices. If these match, your chances of finding the best supplier fit for your company will grow significantly.

Secondly, you should invest in understanding suppliers better and ensure that suppliers get to know you and your goals. For this reason, open and continuous communication between the parties is crucial. Even go visit your suppliers every once in a while, or invite them to visit you. If your operations are aligned between all stakeholders and the relationship is beneficial for both parties, mutual understanding will be easier to achieve.

The third important step of SRM is to actively build trust. This is essential because trust barriers hinder productivity and affect the supplier-relationship now and in the future. By creating trust, transparency between you and your supplier will grow, as both parties are willing to share information. This will help you to create more value and mitigate risk.

The fourth important step in effective SRM is getting supplier feedback. Listening to suppliers’ views on things gives you valuable information on how to make collaboration more effective and efficient. In some cases, suppliers might not have the courage to give improvement suggestions. For this reason, it is important to provide the right platform to enable appropriate feedback processes for suppliers. By collecting feedback, companies will maintain continuous improvement, which results in reduced costs and consolidation of the supply chain.

Finally, being open to supplier ideas is essential for reaching the best results in supplier relationship management. By hearing suggestions from suppliers, you ensure active supplier engagement, which will lead to more and better innovation. This offers you a chance to get ahead of others in competition and win new customers. Most importantly, it creates value for both parties of supplier-relationship, resulting in success of SRM.

Blog post by: George Hall, Suvi Julkunen, Fanni Lindfors, students of Haaga-Helia University of Applied Sciences

Sources:

Arjan J. van Weele: Purchasing and Supply Chain Management (2014)
Costiom presentation (2017)
https://www.researchgate.net/publication/235288492_Supplier_Relationship_Management_as_a_Macro_Business_Process
https://www.pwc.nl/nl/assets/documents/pwc-supplier-relationship-management.pdf
https://www2.deloitte.com/content/dam/Deloitte/ch/Documents/process-and-operations/ch-en-operations-supplier-relationship-management.pdf
https://www.procurementleaders.com/AcuCustom/Sitename/DAM/052/sample-strategy-guide-SRM-0613_1.pdf