Supplier Relationship Management –
Do unto your suppliers as you would
have them do unto you
Supplier relationship management (SRM) is the specialized practice of strategically planning for and managing relationships with suppliers to maximize the value of that relationship.
When reading about SRM the focus tends to be on workflow, software and “strategy” while the most important part, the relationship, is not being discussed often enough. A relationship, according to Merriam-Webster, is the way in which two or more people or groups of people talk to, behave toward, and deal with each other. This relationship buyers are seeking to strategize is simply an interaction between real live people that can’t always be measured numerically.
It has been said that a business can only be as good as are the suppliers with whom it works. Therefore building a good supplier relationship is almost as important as building a good relationship with your customers. Treating suppliers well produces intangible benefits that can lead to a tangible return.
Scheduling Preferences – A healthy buyer-supplier dynamic leads to preferential treatment when it comes to competitiveness boosters such as advance ordering, stocking arrangements, and production scheduling. Having a preferred customer status increases the responsiveness of your supply chain which in turn improves the availability of products to your customers.
Supply Chain Stability – Investing time to understand how suppliers produce your parts gives you the ability to foresee and prepare for anything that may effect the lifecycle of your components. By communicating effectively and regularly with suppliers, buyers ensure that cost, quality and timeliness of products are all being managed. Higher quality increases customer satisfaction and decreases returns, which adds cash to your bottom line.
Input to Innovation – When your suppliers have bought-in to your success they want nothing more than to see you grow and grow with you. When considering a new design or prototype, using a trusted supplier who has experience not only in your industry, but also with your company’s products, saves time in the product development process and gets your new product to market. Positive long term relationships can lead to your best suppliers improving manufacturing processes and technology that help your company develop competitive advantages and cost savings to beat your rivals.
Financial Considerations – Open lines of communication elicit trust that can lead to more flexible terms such as early payment discounts or extended payment options when additional cash flow could benefit your business. Establishing and maintaining a good payment history means your suppliers will be more likely to reciprocate when and if you need it.
There are many ways to promote a healthy relationship between buyer and supplier. Pay on time or if something unexpected happens, call your suppliers and talk to them. Get to know them with an occasional phone call or visit to their site. Help your suppliers help you by giving them adequate lead times, drawings and target pricing. And keep your suppliers informed about changes in your business including sales volume forecasts, new products and staff changes to make sure they are prepared for the changes in your needs.
In order to truly reap the benefits of supplier relationship management, buyers must establish clear communication paths, mutual understanding and respect between both parties.