SRM can provide greater stability and a way to navigate market problems

Businesses find themselves under increasing pressure in the current marketplace, and with customers pushing from above and suppliers pushing from below it’s easy to see why.

With the world economy swinging from recession to recovery the key to success is stability. Even the largest corporations can suffer in an uncertain business world, but that pressure can be somewhat alleviated through the management of suppliers to develop loyal relationships.

Business leaders agree that an area which hinders supplier relationship management (SRM) is a lack of understanding. A lot of procurement leaders still fail to agree on what SRM actually involves, which in turn leads to confusion over how to handle suppliers in a manner that will bring benefits for all parties involved. The solution is simple – businesses need to partake in more open, two-way communication. This communication can ease understanding issues and lead to SRM solutions that can benefit both parties in the relationship.

Second, market intelligence is vitally important if businesses are to get the most out of their supplier relationships. This intelligence is the fuel of a solid procurement strategy, which in turn will help a business develop and grow. Before suppliers are sought, a business needs to undertake a form of self-assessment to establish what its main goals and objectives are, and which suppliers would be needed to best match these. An understanding is needed of both the internal business and the wider marketplace the business finds itself in. If businesses struggle to spot these key suppliers themselves it can be very useful to seek the advice of external consultants. Consultants will have a fresh look at the business and their suppliers and may be able to spot something those within the organisation may miss.

The issue of small and medium-sized enterprises (SMEs) and how they will become increasingly important to businesses and their sourcing initiatives is also a trend. “Great ideas come from every source,” one CPO has said, and this needs to be considered when regarding SMEs. As companies strive to adapt to market trends, rigidity can cause failure. It is SMEs’ ability to provide flexibility and innovative solutions that makes them stand out as a viable option in the current market. It is only logical businesses open their minds and keep even the smallest of suppliers in their thoughts as they make difficult choices on who to partner with. It is not just a coincidence the European Commission has stated SMEs are the way to achieve “smart, inclusive and sustainable growth”.

Businesses need to realise that as markets get more competitive, mistakes become increasingly costly. Mistakes do not necessarily have to originate from inside the business, it can be a mishap by suppliers that causes the business to pay the ultimate price. Well-developed SRM may not be the only way to navigate market problems, but it can certainly help.

Joseph Brown is a consultant at Procuring

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