Supplier Relationship Management
The key objective for organizations in today's cutthroat environment and competitive era is to drive sales and increase margins. To achieve its goals by increasing sales thereby doing an increment in their margins, companies have paid a great deal of attention to the customer side of their businesses thus leading to the evolution of customer relationship management (CRM) that increases companies abilities to understand the customer’s needs and use the customer information wisely to build relationships with their customers. To increase margins, many companies are applying this same emphasis on relationships to the supplier side. This has led to a new solutions area known as supplier relationship management (SRM). In each of these cases, “companies have placed not only a focus on automation and other technical improvements, but on emphasizing the relationships.” (Romala. & Menzigian, 2003)
What is SRM?
SRM is a fresh way of extending SRM tools and techniques to the supplier side resulting in mutual profitability for both the manufacturer and the suppliers. It is a new management approach which is all about collaborating with suppliers in an ‘integral’ way, sharing information with them to achieve speed and transparency in operations. This takes SRM to a different level in terms of depth of relationships between the manufacturer and the supplier. Standardization of techniques across suppliers and different manufacturers locations is critical to the success of SRM. SRM trends include e-procurement, data integration and transparency, and information sharing using a common platform. (solutions.epicor.com)
In SRM, conceptually, the things to be improved and the framework against which the improvements are to be measured are collaboratively defined by the buyer and the supplier. Such an effort is hinged on a firm commitment from both sides. Commitments may include resources such as capital and time. Such collaborative efforts can lead to Immediate and well long-term gains. Short term gains may include improvement in lead times while long term gains may include better quality materials at lesser costs. Long-term gains may also include collaborative planning forecasting and replenishment. SRM is definitely an answer for buyers and suppliers looking for sustainable performance improvement but caution must be exercised while integrating new vendors into the SRM framework. This is because suppliers may be at different stages of there individual learning curves. (Phythian & Allen, Logistics Europe March 2002, p 20-22.)
Increasingly, companies have began to treat their suppliers like they treat their customers As such SRM is an extension of the SRM tools and techniques towards the supplier side. (elix-virtual.tripod.com)
In an effort to run ‘lean’ and more profitable companies, manufactures are looking towards their vendors in the supply chain to drive much needed growth and profitability. SRM as such, works as a strategic tool to create ‘win-win’ situations that are beneficial to both the suppliers and manufacturers.
Stages of SRM implementation
I. E- Procurement: - Being the first stage of SRM implementation, the emphasis is to enhance day to day manufacturer –supplier relationships like procuring supplies electronically using a common SRM platform. Its advantages include proactive ordering, electronic procurement, reduction in inventory and lead times. With e-procurement manufacturers are free to canalize their resources towards more strategic issues in the buyer manufacturer relations. II. Collaborative supply chain management: - In this stage the buyer and the suppliers work together to solve common problems. This is presided by some level of mutual information sharing. SRM provides a common platform for this exchange of information to take place. The benefits of these collaborative efforts include ‘just in time’ supplies of...