How Supplier Relationship Management Drives Productivity and Cost Reduction

By Guest Editor

April 03, 2017 at 9:08 AM

By Simon Hardy, Director of Customer Solutions at Elemica

According to a recent American Productivity & Quality Center (AQPC) report, supply chain managers identify supplier relationship management (SRM) as a top 2017 priority. If properly executed, SRM can result in materials and services arriving at the right place at the right time and can provide an ideal balance of inventory, working capital, and service levels. A disciplined SRM approach increases collaboration and communication between trading partners and helps to remove transactional barriers.

A robust SRM strategy helps businesses to maximize partnership value, minimize risk, and manage costs throughout the supplier relationship lifecycle. As a procurement expert, you recognize that your suppliers are also focusing on their customer journey so that they can ensure your loyalty.

Effective SRM starts with understanding your internal capabilities, your supply base, and the available collaborative technologies. A key goal is to drive holistic alignment with suppliers across the corporation. By automating with the right suppliers, your business can reduce administrative burden and errors, gain visibility into what is happening, and drive down costs.

However, automation alone is not the answer.  Process efficiency needs to first be measured before it can be improved.

To understand the supply base, begin by evaluating your suppliers’ financial stability. Gain visibility into inventory, recognize their flexibility and scalability, attain lead times, monitor key performance indicators, identify their payment terms and evaluate their commitment to customer service. A high level of trust is required to maintain strong relationships. Engaging with suppliers as collaborators evokes a win-win relationship that fosters cost savings and efficiency.

For example, a leading global tire manufacturer was able to remove $800,000 in annual costs through the automation of their direct materials procure-to-pay business process.  Linking the complete inbound supply chain including suppliers, carriers, freight forwarders and third-party logistics providers on a collaborative network provided the end-to-end visibility they needed to eliminate costly expedited freight.

SRM also allows procurement managers to conduct regular spend assessments. This helps them to better understand what they get for what they spend, and also enables them to make accurate comparisons of various supplier offerings.

Other SRM best practices include aggregating same supplier volumes across the organization to provide the business with a stronger negotiating position. SRM can also help you evaluate alternative suppliers on a regular basis so that the best products at the best value can be purchased.  In addition, SRM data can help when renegotiating contracts on a regular basis so that cost and risk can be adjusted.

The need to evaluate supplier relationships on an ongoing basis is symptomatic of the global reality of a marketplace fraught with risk. Socio-economic challenges, natural disasters, war and weather can wreak havoc on suppliers’ facilities and organizations. It is important to have back-up suppliers that have undergone strict evaluation and passed protocol in case something happens to your Tier 1 partner. Buyers need a network that can quickly identify alternative suppliers who have already been evaluated regarding their on-time performance, costs, and lead times.

When collaborating with suppliers, a win-win perspective solidifies positive relationships. As you forge your journey together, you develop a relationship that will thrive for years, or even decades. Help your suppliers to lower their costs by suggesting more efficient manufacturing processes or less costly transportation options. Provide insight into your own production cycles, and educate them as to how their product adds value to your customers. By working hand-in-hand with suppliers, everyone wins.  

About the Author:

SimonHardyV1small.jpgSimon Hardy is Customer Solutions Director at Elemica, the leading Supply Chain Operating Network provider for process industries. By combining powerful SmartLink business process applications with a robust QuickLink Network, Elemica solutions improve operational efficiency, lower costs, and decrease working capital.  Founded in 2000, Elemica today processes over $450 Billion in annual commerce.



Tags: Supplier relationship management Supply chain management Procurement Supply chain
Category: News Article

Guest Editor

user_avatar


Please add a comment

You must be logged in to leave a reply. Login »


Related Content

The Reality of Generational Differences in the Workplace Part One … Refitting the Workforce – This Isn’t the 1980s

Jim Baehr

It’s easy to find reporting on the generational differences in the workplace. For more than a decade there’s been Read More

A New Era: How eProcurement is Helping Chinese Companies Replace Traditional Business Models

Guest Editor

It’s frequently said that the past two decades have been the golden age of internet technology development in China; the country has Read More

How Master Data and Master Data Leadership Simplifies Business and Cuts Costs

George E. Krauter

In the world of MRO supply chain management, “master data” refers to applying proper and Read More


Supplier Profiles

Staples

Staples Advantage is the one supplier that offers all the business solutions you need, all with the expertise of a specialty vendor. Read More

Digi-Key

It started in 1972 with an idea, a new concept in distribution. Today, Digi-Key Corporation is one of the fastest-growing electronic component distributors in the World. The stimulus for this growth is Digi-Key's customer-centered business philosophy… Read More

Lunney Advisory Group

Lunney Advisory Group was founded in 2007. Our firm is not your typical consulting company. Some members of our firm are highly qualified and experienced industry executives/practitioners while others are full time or adjunct university professors.… Read More


Webcasts

What CEOs Expect Of Purchasing

Guest Contributor

Procurement and supply management leaders have a seat at the table, and management’s expectations are high. But what do CEOs really want, and is purchasing delivering on these expectations? This webcast looks at how procurement and supply management … Read More

Growing Purchasing Influence On Indirect Spending

Guest Contributor

At world-class companies, purchasing’s influence touches just about every area of spending. But, how exactly do procurement teams get to the point where other departments approach them for help with sourcing such indirect categories as human resource… Read More

Procurement-Finance Collaboration

Guest Contributor

Procurement & finance are two business functions which are often at loggerheads with each other. One reason for this is the lack of perception alignment on an important metric of procurement and finance performance - 'savings'. Read More