Supplier Relationship Management

What Does Supplier Relationship Management Mean?

Supplier management is the relationship formed between a buyer and supplier, subject to the criticality of the goods or services being purchased and supplied into your organisation, determines the type of working relationship that you should look to form with your suppliers. Supplier relationship management is a core soft skill for all procurement and supply managers.

How Do You Manage Supplier Relationships?

To manage a supplier is to assess their capability to meet your contractual needs, to measure their performance during the contracting period, to work with them to identify challenges whilst looking to improve the working relationship, ensuring you have the right levels of contact to ensure that the relationship remains on track for both parties, in order to get the best from the working relationship.

What Are The Benefits of Supplier Relationship Management?

To successfully manage appropriate relationships it is necessary to look at them from a practice stance. By breaking down the relationship into process steps, then the role of procurement is to measure success based on the ability to deliver business outcomes.

This in turn leads to benefits within the relationship in the form of:

  • Price reductionWorking collaboratively and sharing forward forecasts can open discussion to remove cost from the production process or any other areas of the supply chain
  • Cost information exchange –Buyer/Supplier discussions around total cost to deliver the goods or service, consideration for alternative components/specification variance, inventory reduction and other areas of cost saving, whilst still achieving performance specification
  • Technology or innovation exchanges The supplier may share innovative developments or new market offerings 
  • Improved or priority service levels Highly regarded customers are often offered priority production availability, or based on the scope of work and security of the relationship, suppliers may even consider investment in developing their production capacity to meet increase customer demand 

CIPS Knowledge-related topics, best practice guides and white papers include: collaborative working, managing supplier performance, supplier development and diligent procurement.

What Are the Types of Supplier Relationships?

Supplier Relationship Management

The Supplier Relationship Spectrum and the Kraljic matrix are two key tools that help us to understand how we manage supplier relationships and the type of relationship we should look to build with our supply base:

Download SRM Spectrum
Download Kraljic Matrix

 

Featured Resources

Managing Relationships

Managing Relationships

... No company can allow purchasing to lag behind other departments in adjusting to worldwide environmental and economic changes (Kraljic)

Kraljic Matrix

Kraljic Matrix

This matrix provides a way to distinguish between different types of purchasing strategies which maximise buying power while minimising supply risks

Suppliers in Difficulty:

Suppliers in Difficulty:

Top tips for building a supplier assurance questionnaire (SAQ)

Knowledge Topics:

Managing Supplier Relationship

Managing Supplier Relationship

Building a trusted relationship with the supply base, be that existing or new prospective suppliers is a critical skill for procurement

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Kraljic Matrix

Kraljic Matrix

The Kraljic matrix is a tool used to determine the risk of supply of materials from suppliers that feed into the supply chain

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Suppliers in Difficulty

Suppliers in Difficulty

It has always been important for P &SM Professionals to be aware of the financial health and trading position of suppliers

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Collaborative working

Collaborative working

Collaborative working, also known as joint partnership, is where two or more companies work together to achieve common goals

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Supplier Development

Supplier Development

Supplier development is closely related to supplier relationship management and is the process of working with certain suppliers on a one-to-one basis

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Supplier Coordination

Supplier Coordination

Suppliers can have one point of contact, who will coordinate information and the agreement on behalf of a wider organisation

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SRM

SRM

Supplier Relationship Management (SRM) is a comprehensive approach to procurement managing and capturing the post contract value from relationships

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