Supplier relationship management, abbreviated as SRM, is essentially how your business engages with the vendors who supply your goods, services, and raw materials that make your business function. Having effective SRM in your business isn’t always easy. Every supplier operates slightly differently and provides something slightly different for your business. This means that they cannot be treated the same and it isn’t a simple formula. Behind every order, there are people, suppliers.
Why should businesses focus on supplier relationship management?
With the evolution of eCommerce platforms, technology has shifted the way business-to-business (B2B) operates. Suppliers are becoming more competitive with more choices and accessibility online. It’s hard to know which supplier will work best for your business. They may be the most cost-effective and have the most selection online, but maybe their shipping process isn’t up to speed with other companies. Their policies might be different and they may not have as many representatives to deal with on the phone if there is a problem. Although their product looked good online, if the shipping gets delayed it could end up being one of the factors affecting inventory management.
Building a positive relationship
SRM needs to be a strategic endeavour; it should be proactive, not reactive. If a company only manages a supplier relationship when something goes wrong, it’s hard to build a positive relationship. A company can invest a lot of time and resources into reactive SRM responses. Unfortunately, a lot of time towards other business facets can be lost in this process. Not only that, but if the relationship sours in these discussions, the products may never make it to your warehouse from the supplier. Then you will have a bigger issue on your hands and it will become another of many factors affecting inventory management.
Moreover, supplier relationship management shouldn’t be viewed as just an operational function. It performs much more than any machine in a warehouse. SRM has the potential to direct your company towards growth. The supplies you buy and the people you work with to buy them have the opportunity to change the way your business runs. This can be a positive or negative impact depending on the approach of the SRM.
Therefore, a strategic approach can bring success to both sides of the transaction. With an open conversation and a forward-focused mindset, the relationship can blossom as both sides are on the same trajectory. Building long-term relationships can pay dividends. Once those relationships are established and you know the parameters in which each other work, you can start asking more from them, as the trust is already established. They can help you grow and try new products.
If there was no real relationship, some suppliers might be hesitant to experiment with parts for a new product. They might not want to help if they think you’re not going to continuously purchase them. A relationship from an established supplier will most likely support you in these growth endeavours.
There are several factors affecting inventory management and your inventory can suffer without a strong platform for SRM. Remember it’s important to be strategic and proactive. This approach will allow for potential growth and secure a solid inventory with a forward-thinking SRM.