We bring you a practical guide on Supplier Relationship Management. In the end of this Post, you may download a free complete presentation of 53 slides (in pdf-format). Below is a summary of what you will find the presentation.
Definitions of SRM and benefits
Before we start exploring the details of the work with supplier relationship management, we need to understand what “SRM” really is and what “SRM partnership” means (or so called SRM programs).
“Supplier Relationship Management (SRM) is the entire analysis- and work process on segmentation and management of suppliers as an integral part of the sourcing strategy, optimizing way of interaction and collaboration with each supplier in accordance with specific business needs and desired value.”
“SRM partnership (or SRM program) is the most advanced type of supplier relationship, with developing two-way, mutually beneficial relationships with those suppliers that are most vital to the buying company to maximize value and deliver greater levels of trust, innovation, and competitive advantage.”
Why do we need to enhance supplier relationships through SRM programs and what do we want to get out from such different way of collaboration with suppliers? Here are some common reasons:
- Deliver a lasting legacy of value creation and capture unique advantages
- Streamline communication, build trust, and secure mutual profitable growth
- Improved utilization of complementary resources (the Company/Suppliers), focus on fewer and better strategic relationships
- Build trust and implement a common operating framework for all development work and interactions with core suppliers
- Become Costumer of Choice – and first to be served – for suppliers and vice versa
With above understanding of the terminology and why your company needs SRM, let’s move on the the SRM work process as such.
The SRM 4-Step Process
The SRM process is an iterative process consisting of four major blocks; Segmentation, Objectives, Activities, and Evaluation. Each step is thoroughly explain in the presentation, with plenty of advices and cases from the real business world. SRM is an integral part of the Sourcing Strategy process (illustrated below).
If you are executing a strategy (step 3) and have not done appropriate segmentation, you will need to go back to step 1 and do the complete supplier segmentation and adjust your strategy and set of actions. Assessing suppliers and determine appropriate relationship management is part of the initial homework for buyers and buying managers (step 1). The objectives set together with suppliers shall contribute to and harmonize with your overall business- or procurement targets. The common agenda agreed with suppliers are part of the strategy creation (step 2). Running SRM programs and implementing projects (step 3) collaboratively with selected few suppliers that are vital to the business, are part of your sourcing road map activities that will deliver desired value to the business and achieve or exceed your procurement targets. The last step is about regular reviewing of supplier performance and as well internal evaluation if the SRM partnerships are delivering the planned and desired value to the buying company.
We segment suppliers into four different classification – Transactional, Regarded, Collaborative, and Partner. In the presentation (download it below!) there are checklists supporting your determination of right classification of your suppliers. Overviews and examples on activities that you typically carry out with the differently segmented suppliers are as well included in the practical guide. You would normally do intensive SRM programs with Partner or Collaborative suppliers, while Regarded and Transactional suppliers are managed with less time and resources invested into the relationships.
MOISTER – tool for supplier assessment
We have developed a model called MOISTER, that is an easy and straightforward tool for evaluating if suppliers fit and meet business needs. The tool is used when assessing the suppliers, trying to segment them and select the few that are most important for the business and that might be subject for SRM partnership. MOISTER makes a powerful visualization of your plan with each supplier and the analysis that justifies your proposal/decision. Check it out in the presentation!
In the “SRM 4-Step Process – a practical guide in getting the basics right in supplier relationship management” you will find many tools and examples applied in real business, like:
- Supplier segmentation and decision on SRM partnerships
- SRM program implementation plan for spend category
- Checklist of supplier’s driving forces
- Development Plan with Collaborative and Partner suppliers
- Supplier profile, Project plan and tracker file
- Integration of supplier relationship types into your strategic supplier database
Grab the opportunity equipping yourself with applicable skills and knowledge in SRM. Download it here in pdf-format (53 pages, 2.92MB):
Click here or on the pdf-icon.