Monday, September 7, 2009

Supplier Relationship Management (SRM) - a strategic approach

Most manufacturers agree SRM is important – but do not understand what it really is?
Many see it as a mechanism for monitoring and improving suppliers' performance. This contrasts with the broader definition of SRM as 'a discipline of working collaboratively with those suppliers that are vital to the success of your organization, to maximise the potential value of those relationships.

This misconception may explain why many believe SRM only starts once a contract is signed. It should, however, be used at every stage of the procurement process.
Key suppliers critical to your business should be as important as your customer. Your success demends very much on him

Before you even identify a materials need, good relations with a strategic suppliers could help by bringing innovative ideas to you. These could result in efficiency or real cash savings, product improvements or faster times to market

For example General Motors has just announced plans to split cost savings evenly with vendors that submit successful ideas on cutting the cost of car parts.

Get your existing suppliers involved as part of a cross-functional team. “
Explore how your suppliers supply chains works, especially if you’re attempting something new. Failing to do this could make things unnecessarily difficult for the supplier and potentially add in cost for your company.

Experts advise purchasers consider approaching negotiations with strategic suppliers with one eye on the implementation stage. If you pressure vendors hard for a price cut and make tough, changing demands one day then begin working with them the next, they will not be quick to forget how you treated them.

If you come out of a negotiation being aggressive, with you beating them up one day and beginning to work with them the next it’s counter-intuitive.

Finally, implement your deal and continue to work with key suppliers, forever looking for ideas and innovation that lead to improvements for you both. Remember it is a Win Win solution we want. Have mutual respect for each other