Delve deep into the process of managing supplier relationships through the following blog post. Strategic sourcing processes related to SRM can differ from one organization to the next. SRM, on the other hand, generally entails three broad steps:
- Suppliers should be segmented.
The organization identifies all of its suppliers and categorizes them based on their importance to the business in this first, foundational step, ensuring that the suppliers are most critical to successfully receive the appropriate amount of attention.
- Create a supplier strategy.
In this step, the organization creates a tactical plan for how it will work with each supplier or category of suppliers to ensure successful and mutually beneficial relationships. Organizations should begin with the most critical suppliers but recognize that all suppliers contribute to success and thus merit a strategic approach that includes governance and performance management models to align business processes and assign stakeholders based on business goals.
- Implement the supplier strategy.
The executives in charge of the SRM discipline in the organization must ensure that the strategy is implemented and that they or managers take on day-to-day tasks to implement the SRM plans. They should also devise methods for monitoring and measuring SRM success, as well as identifying flaws and points of failure in the SRM strategy or its implementation.
Case Studies for SRM
Numerous use cases for implementing SRM have been reported, with organizations noting that the discipline helps them to: take better advantage of supplier capabilities; reduce costs; ensure supply chain continuity; limit supply chain risks; increase supplier responsiveness, and gain visibility into future prices and hedge against price volatility.
Consider the findings of a case study published by the State of Flux, a management consulting firm specializing in global procurement and supply chain management. Even though its SRM was considered mature, the US Postal Service decided to update its governance model in 2018. The United States Postal Service reduced its supplier rating system from nine to four standard metrics for the timeliness, quality, cost, and innovation that are applied to all suppliers. Relationship managers assigned to individual suppliers, on the other hand, have the flexibility to include optional metrics for factors such as corporate social responsibility or the quality of specific product categories such as software. Suppliers have contributed to the SRM process through a variety of means, including membership on a supplier council.
You may also be interested in knowing about the inception of Supplier Relationship Management, read along to learn about the same.
SRM’s History
Peter Kraljic, a director at the consulting firm McKinsey & Company, is credited with the development of supplier relationship management. In a September 1983 Harvard Business Review article titled “Purchasing Must Become Supply Management,” he discussed segmenting the supplier base and mapping it against two key dimensions: risk and profitability. Kraljic wrote that in order for organizations to deal with the risks, complexities, and potential supply and pricing disruptions, they must adopt a risk-based approach “Management must learn to manipulate events to their advantage. This necessitates a complete shift in perspective: from purchasing (an operational function) to supply management (a strategic one).” Others expanded on Kraljic’s core concept to create SRM, and the discipline has evolved as technologies and processes changed and matured.
Isn’t this interesting to read? There’s more interesting information posted on the website of EffiGO, you must acquaint yourself with and learn the concept inside out in the most absorbable form, best suited to your procurement needs.
