Blog > Why Supplier Relationship Management Matters

By:  Maggie M. Barnett, Esq., COO at ShipHero

Involved procurement strategies are complex and too often ignored by top-level executives. Supplier relationship management (SRM), for example, is a powerful tool that businesses can use to help evaluate vendors and streamline processes to help create a more efficient and beneficial relationship. 

A study by PwC showed that of companies that implemented SRM strategies, 50% mentioned more efficient processes as a significant benefit of the strategy, and over 40% cited inventory reduction, better customer satisfaction, and more sustainable processes and products. 

One of the main concepts of SRM is to create better relationships with suppliers to enhance your workflow and working relationships. Rather than just working independently from your supplier entirely, you create a closer relationship that leads to improved reliability, trust, and efficiency. By developing these partnerships, you gain a competitive edge and create a more positive working environment for both parties. 

What is supplier relationship management?

Supplier relationship management is the process of examining all suppliers’ performances and measurables to see how well they match your company’s goals while also coordinating strategies with these vendors to improve workflows and collaboration. Through professionally developed partnerships with your suppliers, innovation will flourish, and cooperative, streamlined processes will save time and money for both companies. 

The importance of a supplier relationship management

Fostering improved relationships with your vendors not only can give you a competitive advantage but can prove to have significant cost savings for your company. By examining your supply chain and the suppliers within it, you can create better SRM strategies that will protect and advance your business through a handful of advantages.

Evaluate if suppliers are meeting performance expectations

Supplier management helps you carefully examine if your vendors are meeting procurement expectations. Upon looking at supplier data and KPIs, you may find that they are not meeting all initial goals. Taking a close look at these insights can help you find the best-performing suppliers that you should foster more intimate relationships with and those that may not be a good fit.

Find improvement opportunities with existing suppliers

Strong relationships with your suppliers are essential for collaboration and mutual growth. Looking at the current supplier strategies in place and finding ways to innovate your process with your distributor can help both businesses flourish. By finding areas where your KPIs aren’t quite hitting the mark, you can work together to improve and monitor those metrics.

Reduced costs

The resources required to set up new relationships and contracts with suppliers can be costly and complex. Through supply chain management, you can foster relationships with strategic suppliers to create long-term, mutually beneficial relationships that save both parties money.

Increased efficiency & quality control

Growing more high-quality partnerships with suppliers means that operations between companies become more streamlined and efficient. Through long-term relationships, your teams learn workflow tactics and new approaches to the procurement process that saves time while still ensuring quality production.

Stable pricing

As buyers work more closely with their suppliers and grow a positive relationship, disputes, and hostile negotiations become much less common. A happy working relationship is worth a lot to both companies, enough so that it can create stable pricing agreements as your company commits to continue bringing business to vendors without volatility.

Supplier consolidation

Through the process of SRM, you start examining supplier segmentation within your supply base to analyze better your interactions with individual vendors and those supplier capabilities. Within your supplier management process, you will see which suppliers you can consolidate down to and which may be less ideal import sources.

Prevent supply chain disruptions

Working closely with your manufacturers can help prevent issues if supply chain disruption events occur. With strong relationships and long-term protective strategies, you can ensure that you have a stocked inventory and your suppliers are prepared as best as possible for unexpected events.

Ways to improve supplier relationship management

Improving supplier relationships doesn’t have to be complicated. Here are some ways you can improve relationships with suppliers. 

Value mapping

By examining value mapping such as vendor risk and revenue growth potential, you find truly what a supplier’s contribution will be to your supply chain. You protect your company when you look at the actual value of a supplier beyond just the product price the company hides behind. 

Top-down approach

To ensure SRM best practices across the company, getting buy-in from stakeholders and top-tier executives is essential. Like with customer relationship management (CRM), business leaders can easily undermine the entire process without a total company commitment.

Spend optimization

When looking at your SRM strategy, make sure you are critically examining cost savings and cost modeling. Through value mapping and supplier analysis, you can find ways to optimize your company’s spending better, ultimately improving its bottom line. 

Risk mitigation

Suppliers can be a considerable risk for a company if you don’t do the proper research into their previous work and expertise. Ask for references, and examine their financial performance, especially in comparison to competitors and their pricing. A wholesaler with the lowest price may seem attractive, but paying a bit more for more reliable service is a big deal for the strength of your supply chain.

Positive ROI

Proving the ROI of SRM processes can get buy-in from the C-suite and stakeholders. Through case studies, value mapping, and risk assessment, demonstrate and continue to back the positive ROI that these processes can bring to your company. 

Technology makes supplier relationship management simple

SRM software helps communications with vendors and helps streamline and add visibility to crucial processes like invoicing, payments, approvals, and collaboration. By empowering your team with technology and software, you can take a lot of the risk out of these processes and ensure that supplier processes run smoothly and on schedule as much as possible while being transparent and gathering vital data.

Make timely payments

Just like you want your goods or services on time, suppliers rely on being paid promptly. If something goes wrong and payment will be late, communicate directly and openly with the supplier as soon as you know of the issue.

Implement a supplier information management (SIM) system

Keeping all of your supplier data tracked accurately can be overwhelming, which is where a SIM system comes in handy. All of the information you may need about a supplier, such as contact details or transaction data, is stored and managed within your SIM system. Creating an accessible and visible way to collect this data makes SRM easier and more effective overall.

How to evaluate supplier performance

Not sure if your current suppliers are meeting their requirements? Here are some ways you can evaluate their performance. 

Check if SLAs are met

Continuously evaluate missed deliverables and incomplete orders. Make sure that products or services received are of the quality expected on a continuous basis. Ensuring SLAs are met is crucial to supplier performance.

Create a supplier scorecard

Supplier scorecards can be favorable for both the vendor and your evaluation methods. By setting transparent goals for your suppliers, you both will know what you are working towards and the pain points of the process. 

Use benchmarks

When deciding how you will benchmark your suppliers, consider what your goals are from your supplier scorecard or other value strategies. Having measurables to look at for suppliers won’t always give a complete picture but can help point out prominent trends, strengths, and weaknesses in your supplier process. 

Review & update supplier contracts as needed

You and your supplier’s needs and capabilities will most likely change over time. Rather than be resistant to change, review and update your contracts with your suppliers as situations shift for either party. Instead of keeping unhealthy expectations, morph these agreements to best fit needs across the board.

Conclusion

Supplier relationship management is crucial for a company looking to improve its bottom line and develop its procurement process. Creating solid and long-term relationships with valuable, low-risk suppliers can create a stable and reliable supply chain that will continue to fuel your company for years to come. Developing these partnerships can not only protect your company from future supply chain disruption but from having to create new, costly contracts with potentially high-risk suppliers.

If you’re new to ShipHero Fulfillment, please schedule a meeting today with our experts to learn more about how we can help you get your orders picked, packed, and delivered with our fulfillment service. No setup fees, no minimums, simply pay as you go. ShipHero works to ensure that organizations invest in the solutions that match their needs, to improve productivity, revenue, and success.

Click HERE to Schedule a Meeting Today

Maggie M. Barnett, Esq., COO

ShipHero

About the author:  Maggie M. Barnett, Esq., is the COO of ShipHero. She is responsible for planning and executing the overall operational, legal, managerial and administrative procedures, reporting structures and operational controls of the organization. Barnett’s greatest strengths are leadership, risk mitigation, change management and a passion for business transformation. She is known for her expertise in delivering operational excellence and an ability to provide guidance and mitigating risk. Her leadership of ShipHero is grounded in a servant mentality, always doing the right thing for our stakeholders. Her passion for ShipHero comes from the ability to drive operational excellence throughout the organization impacting the lives of our employees, customers, and partners.

Follow Maggie on Twitter & LinkedIn.