Supplier Relationship Management (SRM)

What is supplier relationship management?

Supplier Relationship Management (SRM) is a process to evaluate and manage vendors (suppliers) that provide goods, materials, and services to a manufacturer or other organization. It involves assessing each supplier’s impact on the organization and identifying ways to enhance performance.

In short, SRM teams are charged with maintaining a resilient supply chain by enlisting suppliers to help improve profitability, sustainability, and performance. Effective SRMs also incorporate flexibility into their supplier base to scale quickly based on shifting demand and to mitigate supply chain risks.

How do supplier relationship management and procurement complement each other?

Procurement is a subset of SMR because SRM encompasses cost and purchasing, as well as evaluating and optimizing supplier capabilities – and supplier relationships. However, procurement technically only involves sourcing materials or components to support overarching supply chain management operations.

What are supplier relationship management (SRM) teams responsible for?

SRM responsibilities for qualifying and managing suppliers include:

• Evaluate suppliers:  Identify suppliers with the capabilities and qualifications to meet a company’s requirements for materials, components, manufacturing capabilities, and transportation & logistics solutions.
• Develop supplier relationships:  Foster relationships with key suppliers and enlist reliable suppliers for items that are commoditized. Emphasize the importance of each supplier in the organizational context. And use supplier collaboration as an opportunity to identify cost savings, opportunities for innovation, and quality enhancements.
• Address supplier risk:  The recent pandemic, geopolitical disruptions, and natural disasters have highlighted the array of threats to supply chain availability. SRM’s that develop a supplier base with the flexibility to address risk management effectively.
• Negotiate contracts for cost, quality, sustainability, etc.:  This includes using should cost analysis to compare real-world material and manufacturing costs against supplier quotes as part of the contract management process. SRM teams also use automated manufacturing insights to estimate the carbon impact of bringing a product to market (e.g., the embodied carbon and in-use/operational carbon associated with a product).
• Manage contracts and performance:  Set the foundational terms and conditions of the supplier relationship. Assess supplier performance against contract terms and facilitate prompt problem resolution to keep projects on track and on budget. SRM teams also evaluate their suppliers to support continual improvement via KPIs, scorecards, or similar metrics.
• Support design and manufacturing operations:  Sourcing and procurement teams involved in early product development with other stakeholders are well-positioned to adjust supplier strategies by addressing potential challenges securing materials, meeting cost or sustainability targets, or addressing other potential issues proactively.

How can companies streamline vendor relationships?

In the current business environment, manufacturers and suppliers aim to streamline their sourcing and procurement processes. Industry Week’s survey, in partnership with aPriori, reveals that 70% of businesses seek to speed up the quoting process, with a preference for a completion timeframe ranging from 24 hours to two weeks.

Digital manufacturing solutions offer a centralized platform for real-time collaboration and information sharing with strategic suppliers to improve supplier collaboration. These advanced digital tools replace outdated request for quotation (RFQ) processes, which are often slow and error prone. Automating and streamlining this process fosters a mutually beneficial relationship.

Modern digital technologies provide capabilities such as “Zero RFQ” or automated procurement, enabling manufacturing companies to:

• Send purchase orders directly to trusted suppliers, saving significant time
• Engage in transparent, database-driven discussions with suppliers about design, cost, manufacturability, and sustainability
• Develop enduring supplier relationships by aligning on key assumptions and fostering mutually beneficial scenarios