If you’re a manufacturer, you need to know about supplier relationship management (SRM). Your business depends on getting products to a target audience. That can’t happen without a steady stream of raw materials and other necessary supplies.
That’s why managing your relationships with suppliers and vendors is critical to keeping a manufacturing enterprise viable.
What Is Supplier Relationship Management?
Supplier relationship management (SRM) is a way to manage work with vendors who supply goods, materials and/or services to a manufacturer. It involves evaluating each of those relationships and figuring out how to improve their performance.
Manufacturers do this by looking at each vendor and determining which is most important to the business in terms of continuity and performance. Through this evaluation, managers can cultivate a better working relationship with the vendors supplying them.
SRM is used by professionals involved in managing supply chains. They are in frequent communication with vendors due to managing procurement, project management and operations. That’s why SMR is often referred to as supply chain management. It is also close to what is commonly called vendor management and procurement processes.
There are, however, differences between supply relationship management and these other related fields. Costs and service agreements between vendors and organizations is the aim of vendor management. The purchases themselves, on the other hand, are the goal of procurement. Procurement deals with the ordering, contracting, invoicing and paying off those procurements.
Supplier Relationship Management Benefits
Part of having a successful business is increasing efficiency. This is easier said than done, especially in manufacturing. This is because manufacturing relies on outside vendors that supply your organization with the materials it needs to create products.
To increase efficiency and profits, companies employ supply relationship management. The benefits of using SRM are many, but they all contribute to a better bottom line.
Relationships with vendors are based on financial incentives. When beginning new relationships with vendors, the set up costs can be steep. SRM is a means of cost reduction by finding a mutually beneficial relationship to save money over the long term. Developing these cooperative relationships with vendors can also help with reducing availability issues, delays, problems in the quality of materials and more, which ultimately helps customers.
Having relationships with suppliers avoids problems that might arise due to poor communication. Developing a relationship with a vendor means building trust, which facilitates better working conditions. This allows for a smoother supply chain flow. That means fewer disruptions; and when there are issues, having a strong connection with suppliers will help resolve them faster.
Less Price Fluctuation
Commodity pricing can be volatile, and customers don’t like to see the cost of their products increasing. When a manufacturer uses SRM they can often set a price for materials, so if there is fluctuation in the market their costs remain the same. Many vendors are willing to offer fixed pricing if the manufacturer is willing to sign a long-term contract.
Building a mutually beneficial connection between manufacturers and their suppliers not only builds trust but opens up feedback and the free flow of ideas. This communication leads to greater efficiency, more streamlined processes and greater customer service. Having project management software to connect ordering, inventory control and more can better facilitate these benefits.
ProjectManager is cloud-based software that helps with real-time connections to work better with suppliers and inventory. Kanban boards visualize workflow and help managers keep inventory balanced with their team’s capacity. Try ProjectManager free today.
Supplier Relationship Management Process
Supplier relationship management is all about planning, tracking, structuring relationships and streamlining processes. This serves to deliver greater efficiency and save money while maintaining quality. For supplier relationship management to be successful, it must target the processes between the company and its vendors on operational, tactical and strategic levels.
Therefore, SRM must be flexible and able to respond quickly to change. This is why the supplier relationship management process is so important. It must be a two-way street, serving both the company and its vendors. There is a need for collaboration, innovation and competitive advantage to make supplier relationship management work.
Follow these steps to develop a successful SRM process.
1. Supplier Segmentation
Segment your key suppliers into different groups, such as strategic, tactical and tail suppliers. Each of these supplier groups will have to be managed differently. Each will require a unique approach and resources.
The first pass of your suppliers should identify which will provide more value for your company. These would be the strategic suppliers. Sometimes, these are the suppliers you spend more with, but they can also be smaller, yet critical suppliers who can help deliver innovation.
Tactical suppliers are suppliers you buy from a lot, but who have limited spending. These are suppliers that you have alternatives to. A tail supplier is any additional supplier that is not crucial to your SRM process.
2. Set Objectives
Having objectives is important. Without objectives, effort can be wasted following dead ends. However, those objectives can’t be plucked out of the blue sky. They must be aligned with your overall business objectives.
Whether your objective is cost savings, innovation or saving time, you will need to determine how you set up your objectives for SRM. Every company will have a different business objective, because each company is different.
3. Measure Supplier Performance
You can’t meet your objectives if you’re not measuring the performance of your suppliers against those objectives. Therefore, measure the most important supplier’s performance and see if it meets your objectives. This means tracking those metrics with your strategic and tactical suppliers. The tail suppliers are not as important.
Tracking performance includes more than just compliance and on-time-in-full (OTIF) measurement. There are many processes that define value in your relationship with suppliers, including delivery, product innovation and how well they collaborate in solving customer needs. Some metrics to follow include delivery performance, quality performance, service performance, corporate social responsibility performance, risk management status and innovation capabilities.
4. Create a Supplier Management Strategy
Create a strategy to stay engaged with suppliers and make sure they’re meeting the objectives you set. This will help you improve your company’s competitive advantage. This type of collaboration is beneficial to both the company and the supplier, as well as helping to meet customers’ needs.
Therefore, you want to be transparent with your suppliers. Let them know what your objectives are, explain your business activities and share supplier performance data with them. This will build trust between your company and the suppliers you use and further help align your relationships with them to your business objectives.
Supplier feedback can often bring unexpected gains in ideas that you had not suspected possible. The better you collaborate with your supplier, the more likely you’ll experience improvements in supply availability, supply quality and reduce wasted resources in the supply chain. There could also be innovative ideas that lead to a competitive edge against competitors in the market.
5. Continue Improving
Your SRM must be constantly reviewed and refined as you continue working with suppliers in order to keep costs down and innovation up. To foster better supplier performance management, you should schedule regular meetings with your suppliers to focus on their quality, delivery, performance and service. That supplier strategy includes sharing data and always being clear on your company’s objectives in working with your suppliers.
Monitoring, tracking and collaborating with suppliers takes the right tools. Supplier relationship management software is designed as a central hub for all supplier-related data. It can help you pick the right supplier, analyze the performance of those you’re working with, help to identify risk and improve collaboration in planning and management.
The right SRM software will offer transparency and allow for sharing of data between company and supplier when working on supply chain management. Automation can help with the day-to-day SRM operations, such as procurement and monitoring supplier performance.
When looking for SRM software, it should have the features you need but not require too much training. Onboarding should be simple. There must also be supplier-facing functionality and communication to foster better engagement. Reporting features should offer detailed supplier performance analytics to help with making better decisions about procurement and other areas.
Core features for supplier relationship management software include monitoring and tracking of supplier performance, document storage for contracts, invoices, vendor certification and any compliance documentation for business requirements. Notifications to keep everyone updated on supplier data. Collaboration tools, procurement management features, supplier risk management, performance management, customer relationship management, inventory management, etc.
How ProjectManager Helps with Supplier Relationship Management
ProjectManager is a cloud-based work management software for hybrid teams that assists companies when monitoring, tracking and collaborating with suppliers by providing real-time data for more insightful decision-making. ProjectManager lets you share data with suppliers and keep everyone up-to-date through email notifications as well as alerts in the software.
Track Performance on Real-Time Dashboards
Since ProjectManager is online, a supplier relationship manager can monitor and track various metrics on performance and progress with a real-time dashboard. The dashboard is already set up and ready to go, and automatically collects data, crunches the numbers and displays it in easy-to-read charts and graphs. The joint demand of tracking is also addressed by being able to share this information with suppliers throughout the relationship life cycle.
Generate Instant Reports for Stakeholders
To share more details on performance and help with demand forecasting with your strategic partners, there are one-click reports on status, costs and more. These reports can be easily shared with suppliers to keep them updated on performance, either as a PDF, Excel or CSV attachment or printed if the supplier prefers. Each report can be filtered to focus on the performance metric that is being tracked.
Store All Supplier Documentation in One Place
ProjectManager has unlimited file storage to store all your supplier documentation in one place. The account manager role is streamlined and security settings can be set to allow your supplier to have access to only those parts of your data you want to share. The supply base is transparent between the company and the supplier. Collaboration is also facilitated by comments that can be read and responded to in real time, no matter where or when they’re posted.
ProjectManager is award-winning software that connects companies and suppliers fostering collaboration and providing transparency into the procurement process. Have a central hub to collect all related materials, stay connected through notifications and share data to meet business strategy with your strategic partners. Join the tens of thousands of teams at organizations as diverse as NASA, Siemens and Nestle. Try ProjectManager today for free!