Supplier Relationship Management (SRM) is crucial for successful procurement. However, traditional methods of managing these relationships have been complex, with poor communication and transparency issues.
In this article, we will discuss the significance of supplier relationship management, its impact on purchasing, and how eProcurement systems are transforming this initiative.
Supplier management is an ongoing process of establishing good relationships with organizations that supply goods and services to your company. This is a strategic method of evaluating which connections bring the most value. Like any relationship, this process requires consistent attention and a systematic approach.
Given modern complex supply chains, companies are moving beyond traditional cost-reduction tactics. Chief Procurement Officers (CPOs) are increasingly redefining existing supplier relationships to better support business needs.
Modern SRM provides a clear framework with aligned management that helps maintain relations at all levels, enhancing transparency and effectiveness.
This is how supplier relationship management works today:
Closing the loop on these steps ensures a solid foundation for a competitive edge through win-win partnerships with vendors.
In 1983, Peter Kraljic, a director at McKinsey & Company, introduced a new concept to purchasing in his article "Purchasing Must Become Supply Management". He highlighted supplier "diversification" as essential for a consistent supply chain.
Although purchasing strategies and tools have progressed since then, companies still prioritize SRM as they refine their sourcing and acquisition operations. According to the 10th annual Supply Chain Management research conducted by APQC, there's a noticeable shift from transactional procurement towards nurturing strategic vendor relationships that benefit both parties.
Moreover, the increasing focus on sustainability regulations made disclosure a mandatory activity. Companies must disclose and validate their suppliers' sustainability data to avoid potential penalties or supply chain disruptions.
Here are the two key issues that effective supplier relationship management addresses:
Ultimately, SRM ensures a smooth supply chain and contributes to your company's bottom line. And yet, can businesses manage strategic relationships with vendors 100% manually?
In today's ever-changing business world, manual processes rarely keep up with all the twists and turns of procurement. Dealing with mountains of data, needing instant insights, and juggling the ins and outs of supplier relationships often overwhelm teams using traditional methods.
This is where eProcurement platforms swoop in, amplifying vital processes like vendor onboarding, communication, and performance tracking.
When companies manually pre-qualify vendors, it involves a lot of emailing back and forth — documentation, certifications, NDAs, you name it. These files are then stored on hard drives, copied, and shared among different people in the organization for approval.
Modern digital systems, like Team Procure, offer a much simpler solution for onboarding suppliers. Procurement professionals can create vendor profiles with all the necessary information stored in one centralized system. They can organize the vendor pool based on custom service areas. When it's time for approval, stakeholders in the organization log into the system and review everything they need swiftly.
Being able to exchange documentation like quotes, contracts, and invoices in a structured environment makes life easier for a company and its suppliers.
Using online platforms, everything is organized and accessible in one place. There's no hassle of searching through emails or folders for the right document, reducing the risk of errors and ensuring that everyone is working with the most up-to-date information.
Plus, features like audit trails provide added security, giving stakeholders peace of mind knowing that the document exchange is reliable.
Conventional methods can lead to fragmented communication, with vital information scattered across emails, spreadsheets, or phone calls.
However, procurement solutions offer a centralized hub for buyers and suppliers to interact with each other. Whether negotiating terms or discussing project requirements, stakeholders can easily communicate using built-in messaging, automated emails, and instant notifications.
As a result, everyone stays aligned, minimizing misunderstandings and speeding up decision-making.
As mentioned, keeping track of supplier performance is critical for effective vendor management. It helps make sure that suppliers meet business standards.
Online procurement tools come with digital scorecards that visually represent vendor performance over time. Users can rate supplier quality based on various criteria, including delivery performance, costs, or reliability, and access or change this data as needed.
Managers can also share this feedback directly with their suppliers, giving them a heads-up on where to improve. Such a practice is an advantage for everyone, as suppliers become better partners, and buyers become happier customers.
Finally, complete visibility over order summaries, pricing agreements, and spending data across multiple suppliers helps organizations respond to negative shifts.
Digital tools make this data readily available and easy to filter as needed. Procurement specialists are able to access historical reports or review individual stats for a specific vendor anytime, anywhere.
With such a high level of transparency, companies quickly identify potential problems and respond promptly to changing market conditions.
Building strong relationships with your supplier base is a must-have in today's acquisition game. With digital SRM tools, organizations streamline their supplier relationship management process from start to finish.
Features like document sharing, live data reports, and performance tracking enable companies to turn their suppliers into valuable partners. This eventually leads to increased efficiency and greater business success.
Don't settle for mediocre supplier management — make it your strategic advantage with Team Procure. Schedule a personalized product tour and get access to a 14-day free trial today!
