The three crucial phases of effective supplier relationship management - Supply Management

The three crucial phases of effective supplier relationship management

Ian Bolger
posted by Ian Bolger
22 September 2015

Getting SRM right can mean the difference between success and failure in the wider supply chain.

There are three distinct phases that can really make the difference when implementing a successful SRM programme.

Planning:

•    Segmentation. Resources and activity need to be focused on the most business critical supplier relationships that have the most to gain from continuous improvement of key performance metrics parameters.

•    Planning to succeed. The procurement process should include a rigorous examination of proposed implementation strategies, ensuring that suppliers demonstrate credible plans to ensure the best possible start to a new supply line. Implementation planning needs to start early, with a clear definition of roles and responsibilities for the supplier and the customer company.

•    Focus on operational excellence. Everyone loves talking about innovation, but in a new relationship the first 6-8 months need to ruthlessly focus on establishing the core service and value levels.

Implementing:

•    What gets measured gets managed. It is crucial to ensure the key performance indicators that define what’s important for both parties are established early, with rigorous measurement processes in place covering the core aspects of performance.

•    Tools, processes and systems. Ensure all parties are equipped with a standard set of tools and templates to create a common language. Use technology to build collaboration platforms and portals, so both parties have access to a single repository of data and improvement planning.

•    Governance. SRM requires an effective governance structure to ensure all parties are held accountable for completing their actions, and to resolve issues that may require input beyond the direct project team.

Operating:

•    Strategic relationship development. Once core performance is stable, both parties need to have a clear agenda to develop the more strategic aspects of the relationship, to benefit both and create real competitive advantage.

•    Platform to perform. Seeing an SRM programme as a process to measure the performance of the supplier is only half the story – one of the biggest benefits is measuring the effectiveness of internal client processes, often a root cause of under-performance. Looking internally can reveal issues that if fixed can benefit the client’s wider supply chain.

Much like passing the baton in a relay, for SRM to work the focus needs to pass from the deal team to the relationship managers, thereby ensuring that the savings don’t drop into the no-man’s land between purchasing and operational management.

☛ Ian Bolger is principal at Efficio.

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