Supplier Relationship Management

Supplier relationship management

Supplier relationship management (SRM) is the discipline of strategically planning for, and
managing, all interactions with third party organizations that supply goods and/or services to an
organization in order to maximize the value of those interactions. In practice, SRM entails
creating closer, more collaborative relationships with key suppliers in order to uncover and
realize new value and reduce risk.
Contents
Overview
Supplier relationship management (SRM) is the systematic, enterprise-wide assessment of
suppliers’ assets and capabilities with respect to overall business strategy, determination of what
activities to engage in with different suppliers, and planning and execution of all interactions with
suppliers, in a coordinated fashion across the relationship life cycle, to maximize the value
realized through those interactions.
[1]
The focus of SRM is to develop two-way, mutually
beneficial relationships with strategic supply partners to deliver greater levels of innovation and
competitive advantage than could be achieved by operating independently or through a
traditional, transactional purchasing arrangement.
In many fundamental ways, SRM is analogous to customer relationship management. Just as
companies have multiple interactions over time with their customers, so too do they interact with
suppliers – negotiating contracts, purchasing, managing logistics and delivery, collaborating on
product design, etc. The starting point for defining SRM is a recognition that these various
interactions with suppliers are not discrete and independent – instead they are accurately and
usefully thought of as comprising a relationship, one which can and should be managed in a
coordinated fashion across functional and business unit touch-points, and throughout the
relationship lifecycle.
[2]

Components of SRM
SRM necessitates a consistency of approach and a defined set of behaviours that foster trust over
time. Effective SRM requires not only institutionalizing new ways of collaborating with key
suppliers, but also actively dismantling existing policies and practices that can impede
collaboration and limit the potential value that can be derived from key supplier
relationships.
[3]
At the same time, SRM should entail reciprocal changes in processes and policies
at suppliers.
Organizational structure
While there is no one correct model for deploying SRM at an organizational level, there are sets
of structural elements that are relevant in most contexts:
1. A formal SRM team or office at the corporate level. The purpose of such a group is to
facilitate and coordinate SRM activities across functions and business units. SRM is
inherently cross-functional, and requires a good combination of commercial, technical
and interpersonal skills. These “softer” skills around communication, listening,
influencing and managing change are critical to developing strong and trusting working
relations.
2. A formal Relationship Manager or Supplier Account Manager role. Such individuals
often sit within the business unit that interacts most frequently with that supplier, or may
be filled by a category manager in the procurement function. This role can be a full-time,
dedicated positions, although relationship management responsibilities may be part of
broader roles depending on the complexity and importance of the supplier relationship
(see Supplier Segmentation). SRM managers understand their suppliers’ business and
strategic goals, and are able to see issues from the supplier’s point of view while
balancing their own organization’s requirements and priorities.
3. An executive sponsor and, for complex, strategic supplier relationships, a cross-functional
steering committee. These individuals form a clear link between SRM strategies and
overall business strategies, serve to determine the relative prioritization among a
company’s varying goals as they impact suppliers, and act as a dispute resolution body.
[2]

Governance
The SRM office and supply chain function are typically responsible for defining the SRM
governance model, which includes a clear and jointly agreed governance framework in place for
some top-tier strategic suppliers. Effective governance should comprise not only designation of
senior executive sponsors at both customer and supplier and dedicated relationship managers, but
also a face-off model connecting personnel in engineering, procurement, operations, quality and
logistics with their supplier counterparts; a regular cadence of operational and strategic planning
and review meetings; and well-defined escalation procedures to ensure speedy resolution of
problems or conflicts at the appropriate organizational level.
[4]

Supplier engagement model
Effective supplier relationship management requires an enterprise-wide analysis of what
activities to engage in with each supplier. The common practice of implementing a “one size fits
all” approach to managing suppliers can stretch resources and limit the potential value that can be
derived from strategic supplier relationships.
[5]
Supplier segmentation, in contrast, is about
determining what kind of interactions to have with various suppliers, and how best to manage
those interactions, not merely as a disconnected set of siloized transactions, but in a coordinated
manner across the enterprise.
[6]
Suppliers can be segmented, not just by spend, but by the total
potential value (measured across multiple dimensions
[7]
) that can be realized through interactions
with them. Further, suppliers can be segmented by the degree of risk to which the realization of
that value is subject.
[2]

Joint activities
Joint activities with suppliers might include;
 Supplier summits, which bring together all strategic suppliers together to share the
company’s strategy, provide feedback on its strategic supplier relationship management
program, and solicit feedback and suggestions from key suppliers.
 Executive-to-executive meetings
 Strategic business planning meetings, where relationship leaders and technical experts meet
to discuss joint opportunities, potential roadblocks to collaboration, activities and resources
required, and share strategies and relevant market trends. Joint business planning meetings
are often accompanied by a clear process to capture supplier ideas and innovations, direct
them to relevant stakeholders, and ensure that they are evaluated for commercial suitability,
and developed and implemented if they are deemed commercially viable.
 Operational business reviews, where individuals responsible for day-to-day management of
the relationship review progress on joint initiatives, operational performance, and risks.
[8]

Value measurement
SRM delivers a competitive advantage by harnessing talent and ideas from key supply partners
and translates this into product and service offerings for end customers. One tool for monitoring
performance and identifying areas for improvement is the joint, two-way performance scorecard.
A balanced scorecard includes a mixture of quantitative and qualitative measures, including how
key participants perceive the quality of the relationship. These KPIs are shared between customer
and supplier and reviewed jointly, reflecting the fact that the relationship is two-way and
collaborative, and that strong performance on both sides is required for it to be successful.
Advanced organizations conduct 360 degree scorecards, where strategic suppliers are also
surveyed for feedback on their performance, the results of which are built into the scorecard.
A practice of leading organizations is to track specific SRM savings generated at an individual
supplier level, and also at an aggregated SRM program level, through existing procurement
benefit measurement systems . Part of the challenge in measuring the financial impact of SRM is
that there are many ways SRM can contribute to financial performance. These include cost
savings (e.g., most favoured customer pricing, joint efforts to improve design, manufacturing,
and service delivery for greater efficiency); incremental revenue opportunities (e.g., gaining early
or exclusive access to innovative supplier technology; joint efforts to develop innovative
products, features, packaging, etc. avoiding stock-outs through joint demand forecasting); and
improved management of risk. In a 2004 Vantage Partners study, respondents reported that on
average, they could save just over $43 million to their bottom line by implementing supplier
relationship management best practices.
[9]

Systematic collaboration
In practice, SRM expands the scope of interaction with key suppliers beyond traditional buy-sell
transactions to encompass other joint activities which are predicated on a shift in perspective and
a change in how relationships are managed, which may or may not entail significant investment.
Such activities include:
 Joint research and development
 More disciplined and systematic, and often expanded, information sharing
 Joint demand forecasting and process re-engineering (has unlocked savings of 10-30 percent
for leading organizations).
[8]


Technology and systems
There are a myriad of technology solutions which are purported to enable SRM. These systems
can be used to gather and track supplier performance data across sites, business units, and/or
regions. The benefit is a more comprehensive and objective picture of supplier performance,
which can be used to make better sourcing decisions, as well as identify and address systemic
supplier performance problems. It is important to note that SRM software, while valuable, cannot
be implemented in the absence of the other business structure and process changes that are
recommended as part of implementing SRM as a strategy.
[2]

Challenges
 Creating the business case
 Executive sponsorship
 Calculating ROI
 Developing an SRM sales pitch
 Finding vendors who have SRM capabilities
SRM and supplier performance management
Some confusion may exist over the difference between supplier performance management (SPM)
and SRM. SPM is a subset of SRM. A simple way of expressing the difference between SPM and
SRM is that the former is about ensuring the supplier delivers what has been promised in the
contract, which suggests a narrow, one-way process. SRM, in contrast, is about collaboratively
driving value for both parties, resulting in lower costs, reduced risk, greater efficiency, better
quality, and access to innovation.
[10]
This requires a focus on both negotiating the contract and
managing the resulting relationship throughout implementation, as well as systematic joint value-
discovery efforts.
[11]



References[edit]
1. Jump up^ "Maximising the Value of Supplier Relationships". CIO Leadership. 9
November 2009.
2. ^ Jump up to:
a

b

c

d
Hughes, Jonathan (April 2010). "What is Supplier Relationship
Management and Why Does it Matter?". DILForientering. Retrieved 26 January 2012.
3. Jump up^ "From vendor to partner: Why and how leading companies collaborate with
suppliers for competitive advantage". Global Business and Organizational
Excellence 27 (3): 21–37. March–April 2008. doi:10.1002/joe.20201.
4. Jump up^ "Strategies for Better Collaboration with your Asian Suppliers". Supply Chain
Asia. 21 August 2010. Retrieved 26 January 2012.
5. Jump up^ "Tiered Supply Chain Management". LTD Management. Retrieved 26
January 2012.
6. Jump up^ "The Changing View of Supplier Segmentation". Inside Supply Management.
October 2005.
7. Jump up^ One, Source (2014). Building the Case for Supplier Relationship
Management.
8. ^ Jump up to:
a

b
"Building the Case for SRM". CPO Agenda. Autumn 2009.
9. Jump up^ Gordon, Mark (2004). Negotiating and Managing Key Supplier
Relationships.
10. Jump up^ Day, Alan. "6 steps to better SRM". Supply Management.
11. Jump up^ "Getting the Most Out of SRM". Supply Chain Management Review. 19
January 2012. Retrieved 26 January 2012.


Supplier Relationship Manager
About the Job
Responsibilities:
• Lead and/or participate in RFPs for IT services; including drafting and negotiating terms and
conditions, scopes of work, service level agreements and pricing.
• Participate in the development of scopes of work (SOWs) and pricing models for major
outsourced IT services.
• Consults with the demand manager in two-way communications to channel and prioritize the
requirements to the suppliers and to ensure that internal customer expectations are met.
• Responsible for establishing governance process frameworks for interactions and integrations
with the different suppliers. Actively participate in supplier governance meetings with Supplier
Relationship Managers.
• Responsible for developing the relationships with one or more strategic (high-spend, high-value
and high-dependence) IT suppliers.
• Responsible to facilitate requirement setting and prioritization for the suppliers.
• Responsible to monitor the supplier’s risk, innovation, collaboration, impact on business
performance etc. and support continuous improvement of these performance metrics.
• Responsible for establishing a systematic tracking of a robust set of internal supplier-related
risks and utilizing such information to complete supplier categorization.

Qualifications:
• Strong relationship and interpersonal skills to be applied in working with suppliers across the
entire contract life cycle
• Understanding of the technology or service delivered by the suppliers
• Strong knowledge of the suppliers, its market, its competitors and market trends
• Knowledge of purchasing practices and process; including experience negotiating service
agreements and general terms and conditions.
• Understanding of best practices and the methodologies and processes used for this category of
IT supplier
• Understanding of internal decision making and the decision making that occurs among
suppliers
• Understanding of suppliers motivations, strategic plans and market challenges
• Strong ability to communicate with IT users and business to understand requirements,
expectations and value measures
• Knowledge of market trends in contract and pricing models, service delivery and performance
management, and innovations
• Excellent written and oral communication skills
• Highly self-motivated and self-directed

Rather entry level so 1-3 years of experience. Education - a Bachelor's degree in IS or Business
Administration. Or if no degree, the manager will consider several more years of experience.