Why can’t we define supplier relationship management?

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Go to any conference or read any article on Supplier Relationship Management (SRM) and the first thing that will come up is the need to outline what is meant by SRM. In stark contrast, Category Management, Strategic Sourcing and even Contract Management, are all relatively well defined. However, there is no universally accepted definition of SRM that provides a similar level of detail and route to adoption.

Different Objectives for Different Businesses

The reason SRM remains difficult to pin down is because organisations have different reasons for pursuingeffective relationships with suppliers. In some cases it might be simply about trying to drive more cost savings from the relationship. This can be done either through direct price reductions or by improving the collaborative efforts between two business partners of long standing.

Others will look at supply chain risk in terms of critical suppliers and examine how to mitigate threats or implement robust fall back plans should there be an impact on supply. Some will be looking to secure (or jointly discover) innovations from their suppliers that drive new products and provide an edge over competitors.

Once we accept that different companies have different target outcomes from the supply base, it becomes clear that a one size fits all approach to SRM simply will not work. The techniques and processes that drive cost efficiencies in a relationship will not be effective where innovation is the key motivation. The very objective of innovation changes the supplier landscape as well. In this context, innovation may well come from a company that doesn’t currently supply you.

SRM Success for Your Business

The key lesson here is that SRM must be defined in terms of your business objectives. It is likely that the industry that you operate in will have a significant bearing on the objectives of your SRM programme.

The first step in developing your programme is to examine the strategic goals of your organisation and determine how those could be met by your supply base. You should also try to establish how your competitors are engaging with their suppliers (which in many cases are likely to be shared with you) to ensure that they are not at an advantage.

Taking these actions will allow you to establish the outcomes you are looking for and to derive an approach for SRM that will help you meet them. This process will enable you to define SRM specifically for your company.

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