Supplier Relationship Management can identify and smooth out many of the chinks businesses are worried about. Image Credit: Shutterstock

Successful supplier relationship management (SRM) saves costs, reduces administration tasks, and strengthens supply chain resilience. This is achieved through mutually beneficial buyer-supplier relationships that require alignment, formalisation, clarity, communication, trust, negotiation, and technology.

The following steps will help you get there:

Pursue shared vision and values

Every group of people have their own unique culture - their way of thinking, belief, and mindset. If you’re assessing suppliers in countries outside of the MENA region, understand their culture and analyze how it may inform the way they do business.

If a supplier’s values don’t completely align with yours, it doesn’t mean you can’t collaborate. However, as a borderless business, you need to formulate a plan to navigate these cultural differences and achieve international success.

Formalise the SRM function

Appointing one specific team member to champion relationship management with suppliers will ensure that your SRM initiative doesn’t fall through the cracks. This individual will be responsible for segmenting the supply base, measuring and improving supplier performance, becoming a better customer, meeting and collaborating with suppliers, and improving supplier quality.

As the dedicated SRM manager, they can constantly assess outside supplier dynamics and internal business imperatives to efficiently support this initiative across all departments.

Implement contractual clarity

You need to ensure there are no grey areas with deliverables and objectives, to avoid misunderstandings, strengthen the relationship, and ensure it continues to grow.

Having standard procurement policies in place helps new suppliers meet compliance requirements and understand what to expect once an organisation decides to use their services. Small- to mid-size companies can download and use supplier contract templates like this for clarification and specify it per supplier.

Maintain open communication

Miscommunication can lead to cost overruns, late or incomplete deliveries and, ultimately, dissatisfied customers.

Clear communication begins with an agreement that must be maintained via regular check-ins. Having a dedicated SRM manager, who can prioritise and facilitate regular meetings with suppliers is useful for consistently addressing any complications that may arise and preventing issues altogether.

Build trust

Suppliers are usually only contacted when problems arise, but to build and grow trust, both parties need to have a vested interest in each other’s success. The buyer should have a continual feedback loop with its suppliers, be quick to respond to queries, and promptly share business developments that may impact the supplier directly. Sharing business wins with suppliers like sales revenue or positive customer feedback on products is a good way to reinforce your appreciation of the relationship and enhance trust.

Paying the supplier on time also demonstrates respect, fosters a healthy buyer-supplier dynamic, creates goodwill, and can motivate performance.

Negotiate for mutual benefit

With SRM, price reductions are achieved through negotiation - not adversarial tactics. A supplier might agree to lower the price of individual products, or fix the future price of products, in exchange for an extension to their supplier agreement or the buyer’s offer to increase the minimum size of orders, which has mutually beneficial effects.

Through continual negotiation, buyers and sellers can assist each other’s long-term success.

Leverage SRM technology

Onboarding the right technology gives procurement managers and teams real-time information and a single source of truth. This will increase collaboration, enhance efficiency, and reduces miscommunication and manual tasks across the procurement function.

COVID-19 led to the expansion of cloud SaaS, which is generally more affordable than for-license, on-premise software. This, and the growing trend for dedicated SRM, has projected the procurement software market to reach $14.10 billion in value by 2030.

The secret to your success is becoming the customer of choice You will know that your hard work has paid off when critical situations arise and you are first in line for important supplies. This can make the difference between sustaining your business and severely disrupting it.

In a survey of senior sales executives, 75 per cent of suppliers said that they prioritised preferred customers when materials or services were in limited supply. When your company has that kind of status in the eyes of suppliers, you can be sure they will have your back, as long as you have theirs.

Many organisations were not so fortunate during the pandemic, only realising the value of SRM once lockdowns began to stall multiple supply chains. As more companies embrace the business value of SRM, we hope these steps outlined help your company to do the same.