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Lars Kuch Pedersen
September 12, 2018

5 Ways to Improve Your Supplier Relationship Management (SRM) Process

Improve Supplier Relationship Management

One of the main priorities of many businesses is to build long-lasting supplier relationships based on trust and loyalty. However, this can be achieved only through a well-structured Supplier Relationship Management (SRM) process, which will establish a win-win relationship for both sides.

What is Supplier Relationship Management?

SRM is a strategically planned discipline for managing interactions with third-party organizations, supplying goods and services to your business, with the aim to increase the value of the interactions. To have a prosperous business and build deep-rooted and positive relationships with vendors, you should ponder over improving your supplier relationship management process.

In this post, we have outlined 5 of the most functional and up-to-date ways to improve your Supplier Relationship Management process in a reasonable time period.

Let’s check them out one by one.

1. Segment your suppliers

You may wonder why supplier segmentation is so important. The reason is that suppliers vary depending on their level of engagement, criticality to your business, etc. By classifying suppliers into segments according to pre-agreed criteria, you will be able to provide relevant attention to each of them. It’s a smart way to understand the appropriate level of engagement that you need to provide to different suppliers.

Furthermore, supplier segmentation will allow you to decide upon the vendors, who would be able to create a competitive edge for your company. The absence of a properly planned segmentation may result in a supplier approach that is not differentiated. This means that all suppliers would be managed using the same approach wasting resources on small and non-strategic suppliers, and not spending enough time and focus on the strategic suppliers that give your company a competitive edge.

Supplier segmentation can be done in many different ways using many different segmentation groups, such as strategic, important, or transactional. The key is how you approach and manage different suppliers in different groups, and not the grouping itself.

In addition, you should have your SRM process documented for each supplier segment. This should serve as a direction and a helping guide for both the supplier/category manager and the team, who is responsible for the SRM process.

2. Set the right team

Different supplier segments require different supplier approaches and therefore different competencies. A commodity supplier/category requires a strong negotiator while a strategic non-commodity supplier may require a stronger relationship builder. Research shows that the core of SRM are people and their soft skills. Having responsible people with relevant skills working for your business is vital for a successful Supplier Relationship management program.

Supplier relationship specialists are highly engaged with suppliers. This means that both sides share an interest in boosting the value and profits, and they have created a strong bond with each other. So, having relevant people with the right relationship-building skills and a solid business understanding is important. These relationship-building competencies are typically not found among the strong negotiators, so it makes sense to recruit different people for different supplier segments. Building stronger relationships with strategic suppliers will enhance the improvement of your cooperation, thus improving your business’s competitiveness.

3. Build strong relationships with strategic suppliers

Proper communication is the most essential point in the supplier management processes when working with strategic suppliers. Hence, it’s highly recommended to build strong and trustworthy relationships with strategic suppliers and treat them as your trusted partners. You should show that your interaction with them is not limited to cost-saving initiatives, deadlines and one-sided support only. There should also be discussions and agreements on how to jointly improve the cooperation for both parties, potentially making the joint business and value creation greater for both parties.

The best and most effective way to build constructive communication with suppliers is by sharing your plans, strategies, or goals. Show that you are willing to be transparent. Transparency will not only strengthen the trust, but it will also open new opportunities for suppliers to understand where they fit in your greater plans. Thus, they will be able to proactively suggest how they can help your business be even more competitive in the market.

4. Embrace technology to ease the process

Another way to improve your supplier relationship management is by enabling technology to ease the overall SRM processes. With technology built for CPOs, procurement directors, category managers, supplier managers, and procurement teams, you can automate a significant number of processes that would require a lot of time and effort if implemented without the help of technology. At the same time, technology can enable a much more fact-based approach to the supplier relationship by having key facts related to the suppliers in one solution.

With the help of fit-for-purpose software, you will be able to reduce supplier risk, supplier cost and improve supplier performance, quality and service. In a good SRM solution you would have solutions for:

  • Supplier delivery performance management
  • Supplier quality performance management
  • Supplier spending development
  • Supplier data management
  • Supplier task management
  • Stakeholder feedback loops, so you know stakeholders’ experiences regarding suppliers
  • Supplier sharing and collaboration, so suppliers can see how they are measured and how they perform on selected criteria

There are a number of companies that offer SRM software that will keep you ahead of the game, We at LeanLinking are providing Relations, and here is a case study that you can check: DS Smith Has Chosen LeanLinking To Drive Supplier Performance And Compliance

5. Analyze the data and facts

Most companies have relevant data on suppliers that can give different indications on how the relationship is. This can be data regarding the spend, delivery, quality, or service development on suppliers. In many companies, such data are scattered and not utilized to the fullest potential. To avoid any unwanted risks related to the lack of supplier compliance or performance, you should identify what relevant data you can have available and then start tracking and analyzing these data. Such data can be valuable in discussions with suppliers about the performance of your cooperation. It can help you and your suppliers identify areas and processes with challenges that need attention to develop joint cooperation.

With relevant software, you will be able to easily analyze the history of each supplier and mitigate any risks regarding their performance. By analyzing the data and facts, you will be armed with plenty of information that will allow you to build stronger supplier relationship and improve joint performance in the supply chain.

Thanks to proper software, you will be able to leverage the supplier information and consequently negotiate better contracts.

Check out our SRM Handbook for more in-depth details about improving your Supplier Relationship Management process.

Lars Kuch Pedersen
Founder of LeanLinking SRM and Negotiation Solutions - Procurement Advisor to Global Top 100 brands - Mission to empower procurement.
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