All plans, strategies, and steps involved in analyzing, rating, and improving supplier value for a business, come together as supplier relationship management (SRM). Successful vendor relationship management is essential for a supply chain to function smoothly. Naturally, that makes successful SRM a critical requirement if a company is to become and/or remain profitable. With a focus on long-term success, let’s discuss some of the proven practices for successful supplier relationship management.
Always Strategize Around the Core Objectives
Despite multiple differences between the various sectors that rely on SRM methods, the core objectives remain the same.
- Identifying all active suppliers, as well as some of the potential alternative vendors.
- Analyzing and evaluating supplier relationships.
- Assigning value to each evaluated supplier, based on their contribution and importance to the business’s long-term success.
- Establishing firm long-term relationships with high-value suppliers
- Planning and implementing strategies to boost all active supplier values to the business.
The goals mentioned above provide structure to SRM method development. If any aspect of the present system is not in line with one or more core objective(s), steps must be implemented to correct that.
Integrate a Capable Supply Chain Risk Management System
Managing a supply chain in any capacity does not come without its share of potential risks. Nevertheless, those risks can be considerably mitigated by integrating a supply chain risk management (SCRM) system. Providing access to real-time information about all vendors and especially sub-tier entities is to be expected from competent SCRM solutions. Just make sure that the SCRM can quickly identify risky sub-tier entities and warn against previously unidentified noncompliance risks. The supply chain risk management system should also be able to detect, identify, and warn against future partnerships with risky, dubious, and banned suppliers.
Nurture Small Vendor Relationships
If your supplier relationship management system is competent, it will come with a reliable scoring system. Based on the analysis, the system will then assign scores to all active suppliers based on applicable KPIs. It’s a simple, proven, and effective system of identifying which vendors hold the most importance for your business. However, your focus should not remain exclusively on just the present score/value of a vendor.
Use the analytics info, insights, and forecasts generated by your supplier relationship management system to identify new vendors with high future potential. Even if their present contribution to the business is low, nurturing relationships with highly compliant, small suppliers can pay dividends. Showing confidence in new and capable suppliers builds the foundation for strong business relationships further down the line.
Facilitate and Streamline Multivendor Collaboration
If your company is in a position where it can benefit from vendor collaboration, then you should take advantage of it. Connect all suppliers via one online platform, so that both you and your vendors can see where each of them is in their respective lines of supply. Check to confirm that the system comes with an option to add external accounts for (restricted) vendor access.
Real-time visualization goes a long way towards streamlining collaboration. Even if the collaboration is not required or isn’t feasible, your supply chain managers will be able to use the real time data and visual info to coordinate with multiple vendors seamlessly. This can be even more useful if the system has map integration for supplier accounts.
There is a lot of scope for variability in successful supplier relationship management strategies based on the concerned sector. Nevertheless, the best practices can be considered universal in almost any business where there is a need for active supplier relationship and risk management.