So many organisations are realising the impact that effective supplier relationship management can have on their bottom line. But to be honest when I first heard the term I thought ‘SRM’ was yet another buzzword thought up so that IT companies could sell the same old thing but from a different angle.
How wrong I was….
I read recently that companies that are focused on effective SRM lead their peers five to one in terms of value derived from their supply base. But how?
Well, each supplier represents a relationship which needs to be nurtured, as well as an element of risk which needs to be managed.
So it stands to reason that your supplier database needs to be in one place – accurate, complete and consistent. The trouble is, that to keep supplier details accurate and up to date is a never ending task and this laborious administration overhead often isn’t the responsibility of any particular department. Supplier details are held in the finance system, but as static data so that invoices can be paid, and without a supplier database it can be impossible for procurement to maintain this data.
So how much easier would it be if suppliers could update their own profile via a secure login (outside of your firewall) themselves? Most would agree that eliminating the burden of keeping records up to date internally can be a massive cost saving. But a very real benefit in pounds and pence is the improvement in supplier relationships that can literally make or break your business.
A well thought out new supplier process with on-line questionnaires, auto-score responses and automated workflow means that supplier adoption is efficient, fully auditable and visible to all that need it. That’s all very well, but how can you ensure that you’re getting the best possible value from your suppliers once they become an approved supplier?
Well for a start, poor communication processes make life harder for suppliers, it adds to their cost of doing business with you – cost that is ultimately passed on to you in some form.
An effective Supplier Management strategy can make your company “easy to do business with” for suppliers, resulting in strategic benefits ranging from reduced supplier risk, to lower overall costs of the goods and services you purchase, to the improved agility you derive from a strong, responsive supplier base.
Studies have found that top procurement teams that have successfully aligned with their key suppliers have improved supplier capabilities of innovation, quality, reliability and price reductions.
So I realise that SRM is far more than a single (accurate) supplier database that’s complete and up to date (although this does pay dividends), but SRM is absolutely crucial for cost reduction, ensuring compliance and guarding against risk.
It’s not just a buzzword after all.