While developing relationships with strategic suppliers is essential, discovering new and creative ways to leverage them is more critical.Like the way customer relationship management (CRM) streamlines the process between an organization and its customers, SRM develops the relationship between an organization and its suppliers.
These alliances can have innovations to explore — different routes that promote efficiency and quality.
Thinking outside of the box can make the SRM discipline successful by optimizing the entire business value chain, and not just cost savings and immediate supplier impact.
Goals of SRM
There is the task of achieving objectives rather than simply interacting with suppliers on an ad-hoc basis. The identification of specific goals and then developing strategies around them is a better way of implementing SRM.
For that reason, strategic leaders prefer continuity of supplies, thereby leaning towards long-term relationships with the suppliers. Also, cultivating personal relationships with suppliers and building trust could mean joint initiatives in developing innovations.
Apple keeps a set of guidelines for its suppliers, detailing what it expects about labor and human rights, health and safety, and environmental effects.
Supplier relationship management aims to make the supply chain work better by improving communication, coordination, and collaboration with suppliers. With SRM, we can improve the quality of products and services, reduce costs, and accelerate ideation and innovation.
How SRM Tackles Challenges
Prioritizing Supplier Relationship Management initiatives is crucial because tackling every issue at once is impossible. With this in mind, focusing on the area with the potential for efficiency gains and cost savings may be vital.
Considering how each initiative fits into the overall business goals and prioritizing them can contribute to the organization’s value. In effect, SRM steps in to tackle several common challenges in procurement and supplier management.
Onboarding Challenges
A strong supplier relationship lays the foundation for a great onboarding process. It is an integral part of a supply chain, unfortunately, the process is neither simple nor speedy. There are many pitfalls, but the two main ones are:
- Process management because it involves various people, teams across locations.
- Lack of centralized data leads to siloed information across systems.
Moreover, poorly managed onboarding can cause significant project delays affecting deadlines and overall project timelines. Having said that, inefficient onboarding not only consumes extra employee hours but can also disrupt cash flow and profitability, particularly when project deliveries are delayed.
Without a systematic and comprehensive onboarding process, it becomes challenging to manage and mitigate risks or ensure regulatory compliance effectively.
The quality of data is another aspect to consider, as it affects our decision-making across various business facets, from sourcing to insurance and certifications.
Therefore, an efficient SRM can address the above challenges by ensuring smooth onboarding. SRM simplifies the often-complicated process of bringing new suppliers on board, making it more efficient and hassle-free.
A significant impact can be achieved by fostering trust and a collaborative culture, eliminating duplicated efforts and streamlining the process, and ensuring suppliers start their journey on a positive note.
Other Challenges
Here are some other significant challenges that Supplier Relationship Management can address:
Disconnected Supplier Relationship: SRM aims to bridge the gap between organizations and their suppliers by encouraging better collaboration and communication.
Toyota, a pioneer in supply chain management, has long implemented SRM practices to build strong relationships with its suppliers. This approach has helped Toyota quickly recover from disruptions such as natural disasters and maintain a robust supply chain.
One-Size-Fits-All Procurement Solutions: Instead of forcing the same approach on all suppliers, SRM tailors strategies to meet each supplier’s unique needs.
Lack of Visibility into Supplier Risk: SRM equips organizations with tools and processes to assess and keep an eye on supplier risk factors, allowing them to take proactive steps to address potential issues.
Inconsistent Supplier Performance Evaluation: SRM introduces standardized metrics and evaluation criteria, ensuring that suppliers are assessed consistently and fairly.
Difficulty in Identifying Supply Chain Risk: SRM helps in identifying and managing various supply chain risks, such as disruptions, quality problems, and compliance issues, to enhance overall resilience.
GE has successfully implemented SRM strategies to mitigate supply chain risks and enhance efficiency. The company’s focus on supplier collaboration has been instrumental in maintaining its global operations.
Lack of ESG (Environmental, Social, and Governance) and Diversity Considerations: SRM considers Environmental, Social, and Governance (ESG) factors as well as diversity considerations, encouraging sustainable and inclusive practices among suppliers.
Nestlé emphasizes sustainable sourcing and supplier collaboration in its SRM efforts. These practices not only improve resilience but also align with Nestlé’s commitment to environmental and social responsibility.
How can SRM Improve my Organization’s Supply Chain Resilience?
A supply chain’s resilience is its ability to withstand external shocks to its supply and demand — maintaining the flow of goods and services while minimizing lost sales. That is, Supplier Relationship Management acts as a linchpin fortifying supply chain resilience.
An effective SRM helps form strong and collaborative bonds with suppliers. As a result, suppliers respond swiftly to disruptions, thereby upholding business continuity.
Moreover, companies can now pinpoint potential risks and devise proactive strategies to mitigate them. Supply chain strategies include diversification of sourcing, contingency planning, and embedding redundancy.
After all, a company’s supply chain is prone to risks — but the lack of visibility into the supply chain is one of the most common challenges. While not working closely with the key suppliers could be detrimental, adhering to SRM practices can strengthen resilience.
In the same way, SRM enables companies to adapt quickly to changes and fluctuations in the market. A flexible supply chain process, technology and automation, and the right innovation can help achieve this agility.
As can be seen, SRM is the bedrock for the advancement of supply chain resilience. Through collaborative supplier relationships, meticulous risk management, supply chain transparency, and agility support, it achieves these objectives.
By investing in SRM, companies are prepared to effectively manage disruptions and navigate an ever-evolving market ecosystem.
How can Gainfront Help?
Ultimately, an appropriate SRM or supplier management software can eliminate challenges and increase ROI (return on investment) during the SRM process.
Gainfront’s Supplier Management solution helps you leverage your Supplier Relationship Management activities and provides end-to-end integration, including supplier onboarding.
Want to learn more? Contact us today OR Request for SRM Demo!
Rahul Asthana has a PhD in Operations Management from the Anderson School at UCLA. He has 25 years of experience in supply chain management, starting his career in IBM working in supply chain operations. He then moved into product management and product marketing of supply chain software while at SAP and Oracle. He manages product strategy and product management at Gainfront. In terms of hobbies outside of work, he really enjoys tennis. Follow Rahul Asthana on Linkedin!
