Modern businesses work with many suppliers and vendors. Due to this, supply chains are becoming increasingly complex. During the COVID-19 pandemic, companies had to make major changes to their supply chains to keep running their business efficiently.
Cutting down on prices and adjusting the margins means you still have to somehow maintain profitability while driving efficiency. As a result, companies need to manage their supplier relationships. For all the materials and goods they need, a systematic approach will benefit them.
This is where Supplier Relationship Management (SRM) comes in. Companies can evaluate, manage, and culminate better buyer-supplier relationships. Supplier Relationship Management is effective for better supply chain activities and leads to healthy outcomes.
What is Supplier Relationship Management?
Supplier Relationship Management (SRM) is a systematic approach where companies proactively review their suppliers regularly. They take note of the key performance indicators (KPIs) and make sure they manage any challenges in their supply chain.
SRM is not the same as Supplier Management. In SRM, individual suppliers aren’t being managed. In today’s world, globalization has led to supply chains growing rapidly. Economies are becoming interconnected, and it is becoming relatively easier to source products and services from various parts of the world at lower prices.
This means that effective supply chains and proper supplier relationship management are a necessity. If companies have complex supply chains, Supply Chain Analytics Platforms are crucial. It helps create meaningful and trusted relationships with vendors and suppliers. It results in businesses gaining a sustainable competitive advantage.
Outcomes of Supplier Relationship Management
When purchasing professionals gain more insight into their supply chain relationships, it leads to the following outcomes:
- Customer service improves, and there is increased trust leading to fewer conflicts.
- Increased communication, which results in quick resolving of issues, improved understanding between buyer and supplier, and reduced operational costs.
- Greater innovations, higher product/service quality, and enhanced operational efficiencies.
Benefits of Supplier Relationship Management
Improved Cost Management
This is one of the main benefits of supplier relationship management. When companies analyze their supply chain data, they can review their relationships with the suppliers and proactively engage in cost reduction/management.
Cost management helps minimize costs by negotiating new contracts. Companies can evaluate their supply chain and find pricing deltas, create product or vendor rationalization, and determine the logistics for cost savings.
This doesn’t just reduce or minimize costs but also increases supply chain efficiency, which is the next benefit of SRM.
Increased Operational Efficiency
Supplier relationship management leads to streamlined operations. It improves the overall operational efficiency of a business. When companies regularly review their suppliers, it helps them understand their supply chain better.
As a result, consolidating items, reducing numerous vendors, and building mutually-advantageous relationships can reduce the effort and time managers put into managing the supply chain.
When companies expand, their supply chains also grow both in complexity and size. This means that effectively managing multiple suppliers can become increasingly hard. SRM gives companies the opportunity to not only engage with their vendors but also create relationships that add value to their business. Success is the key for both the buyers and suppliers.
Greater Consolidation of Supply Chain
Another benefit of SRM is improved supply chain consolidation. Consolidation helps improve supply chain efficiency and reduces price volatility. Regular SRM checks and reviews allow businesses to share their plans and outlook with their suppliers.
When businesses and suppliers work together, they can come to the best possible arrangements for the future. These arrangements also include agreements with pricing details. With regular reviews, both parties can agree on reduced prices.
Stronger and Long-Term Supplier Relationships
Another benefit of SRM is stronger relationships with vendors. Most companies often overlook this, but for better relationships, SRM is needed. It helps understand the existing cultural differences and norms and improves buyer-supplier relationships.
Understanding how different cultures work and conduct business helps in understanding their products and services and builds mutual respect and trust. This results in meaningful and better relationships that foster collaboration, innovation, and improved performance.
PREDIK Data-Driven is a US-based research firm with expert customer analytics service providers who can guide businesses through various complex problems. PREDIK offers various data analytics solutions for businesses in a variety of sectors, including healthcare and retail.
If you’re looking for a supply chain analytics platform for supplier relationship management, request a demo today with PREDIK Data-Driven. They also have a supply chain mapping tool.
