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How to improve your supplier relationship management

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Last editedSep 20202 min read

Not only is supplier relationship management a crucial part of your procurement cycle, but maintaining a good working relationship with your vendors is one of the best ways to drive your business’s competitive advantage and boost your operational efficiency. There is a broad range of supplier relationship management strategies that may help you take this crucial part of your business to the next level. First off, take a look at our supplier relationship management definition.

What is supplier relationship management?

Supplier relationship management (SRM) refers to the management of your business’s third-party vendors (i.e., suppliers that provide materials, goods, and services to your company). Ultimately, supplier relationship management is all about maximising the performance of your partners, just as you will want to get the best performance out of your employees. Although getting the supplier relationship management process flow right might seem relatively straightforward – work with cost-efficient, agile suppliers to maximise value – there’s a little more to it than you may think.

What are the goals of supplier relationship management?

Typically, supplier relationship management aims to improve the processes between a buyer and a supplier. You can think of it like CRM (which seeks to streamline the relationship between a business and its customers), but for third-party vendors. You’ll aim to develop a mutually beneficial relationship with your company’s suppliers, particularly the ones which have the most strategic importance to your brand. As global supply chains have become more complicated, and businesses have begun to rely on more suppliers, the importance of supplier relationship management process flow has risen.

Supplier relationship management strategies

Building long-lasting relationships with suppliers – based on mutual trust – should be one of your most vital long-term goals. Here are some strategies and supplier relationship management best practices that can help you achieve this:

  1. Communicate effectively – When it comes to communication, it’s not just about the frequency of your correspondence, but its effectiveness as well. Use the most appropriate channel for communication and ensure that the recipient clearly understands what you’re attempting to convey. For your supplier relationship management process flow, it also helps to understand your supplier’s culture/language to avoid anything getting lost in translation.

  2. Make detailed agreements – Ultimately, the bedrock of all supplier relationship management is the contractual agreement. Write down everything that you expect from the partnership, including prices, service descriptions, delivery terms, and payment terms. Everyone’s role and responsibility should be defined so that if there’s ever any conflict or disagreement further down the line, you can refer to the contract for resolution.

  3. Utilise technology – Technology has revolutionised supplier relationship management. If you have an SRM system, you can gain full visibility into your suppliers, understand the different forces impacting your supply chain, and take steps to minimise risk. There is a broad range of supplier relationship management systems that you may wish to invest in, including software from Ariba, SAP, and Oracle. If you decide to use technology, try to find a package that’s well suited to your needs, whether you’re focused on contract management, operational procurement, supplier data management, or so on.

  4. Make timely payments – When it comes to your supplier relationship management best practices, making timely payments is one of the best ways to show respect to your vendors. Ensuring that you always pay your vendors on time proves that you’re a reliable customer and encourages your best vendors to carry on working with you in the future.

  5. Conduct risk evaluation – Supplier relationship management strategies should also extend to risk assessment when you’re sourcing a new supplier. This can save you a significant amount of time and effort further down the line, as one vendor could potentially put your entire supply chain at risk. Ask for references and conduct an extensive background check to make sure that the supplier has the right experience and capacity to deal with your orders.

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