Supplier Relationship Management

Supplier relationship management (SRM) refers to interacting with a managing third-party vendors that provide goods, materials and services to your business. On the surface, you choose suppliers that are cost-efficient, easy to work with and allow you to maximize the value you bring to your customers. But like everything in life, it’s never that easy.

Supplier management has become more complex over the years due to the growth of technology and the globalization of the supply chain. With so many supplier options, it’s hard to choose the best fit.

Let’s discuss SRM and how to use emerging strategies to streamline your supplier management system.

A 1998 study titled, “An empirical investigation of supplier development: Reactive and strategic processes,” listed two approaches to the supplier management process:

1. Reactive approach: This approach refers to companies that start managing supplier relationships only when unpleasant situations arise, and act only to improve the performance of unreliable suppliers. This takes up a lot of time and resources that could be better spent on optimizing your supply chain on the whole.

2. Strategic approach: This approach involves beginning SRM before an agreement with a supplier is signed. This is a forward approach that leads to successful supplier relationships in the early stages of the relationship, and sets the foundation for successful supplier relationships down the line.

There are three main types of suppliers your business can work with in the supply chain:

1. Wholesalers and distributors: These suppliers purchase goods in bulk and then resell them for a higher unity price. They offer the lowest prices but only sell in large quantities and are generally unwilling to work with smaller orders.

2. Manufacturers and vendors: The suppliers handle goods from several different companies. Prices may be higher, but they accept smaller orders from a wider range of manufacturers.

3. Import sources: Domestic importers that operate similarly to wholesalers but sell foreign goods to businesses.

Unreliable suppliers can lead to huge disruptions in your business’ processes and supply chain. Being able to work with reliable, on time suppliers can help scale your business quickly and efficiently.