There’s an old phrase that goes, ‘communication can’t be a one-way street.’ The saying applies to communication in all of its contexts really, from personal to professional or otherwise. The same principle applies directly to the pursuit of building long-lasting customer or client relationships in professional settings. Taking this a step further, it also is a vital aspect of building a successful and efficient supplier relationship management process or systems for SRM.
Supplier relationship management is one of the core responsibilities of the procurement department as a whole. By building and facilitating relationships with suppliers for various goods and services your team is already conducting supplier relationship management to some degree. Elevating your business means taking this process more seriously and developing a system and series of processes to analyze, assess, monitor, and nurture more symbiotic supplier relationships.
Supplier relationship management is an important aspect of any procurement strategy and is one of the main aspects of strategic sourcing. Strategic sourcing targets vendors and supplier relationships based on the lowest possible true cost of an item or contract. The true cost, unlike a price-point, takes many more factors into consideration than simply the upfront price. Considering quality elements, as well as a series of other important variables that influence the total lifetime value of a contract.
Since strategic sourcing is based on life values and true costs of contracts, it goes to reason that procurement professionals making use of this tactic would also have an interest in nurturing long-term contracts with a regular carousel of suppliers. This is, in part, due to the fact that contracts with longer terms typically carry heavier discounts and build more value into the deal.
Keeping this in mind, supplier relationship management and strategic sourcing truly go hand-in-hand with one another.
The Value of Long-Lasting Supplier Relationships
There’s an undeniable value to the reliability, trust, and familiarity that can only be developed over time. This is essentially the main goal of supplier relationship management. By using procurement tools and creating supplier assessments, your team will be able to make side-by-side comparisons on existing, pending, and potential future vendors or suppliers. These insights will shed light on the vendors and suppliers with whom relationships are worth pursuing, and will also bring the bad apples, so to speak, into the limelight.
By having long-lasting relationships woven into your procurement department, your team can expect a stronger sense of loyalty from your organization. But this is about much more than loyalty. There’s an alignment factor present as well. With such a rich economy full of a variety of suppliers and vendors, it’s important that your company is working with people who are on the same page.
Rampant miscommunications, or simply misaligned business values or practices, can take a blossoming supplier relationship and turn it into a storm that never should have been. By working with the same vetted suppliers and vendors year-over-year, however, builds trust and elevates both parties involved.
Implementing a contract management sub-department into your procurement department is becoming a modern and industry-accepted standard and best practice. As part of the seven-step strategic sourcing process, contract management plays a massive part in the supplier relationship management process. The two efforts coincide and require cooperation if they’re handled by different personnel within your organization.
Contract management, and contract management software, make use of modern technology and business logic to conduct thorough statistical analysis with collected data. The software then uses this data to identify savings opportunities, redundant or repetitive contracts, double orders, and other contract-spending patterns.
By combining supplier relationship management and contract management, your team will have the insight and the tools they need to find sustainable long-term vendors and suppliers that meet all of their needs.
The Role E-Procurement Plays
E-procurement is the intersection of procurement and technology. Making use of a variety of technically capable tools and software, from contract management software to supplier relationship management software, and even an overarching procure-to-pay software, modern-day procurement solutions include a variety of high-tech tools designed to bring more powerful insights to the surface and elevate your procurement efforts as a whole.
E-procurement also prioritizes efficiency by creating faster and more effective systems. This, in turn, allows employees to reallocate their time to more impactful and significant business activities that further the efforts of the organization as a collective.
A Quick Recap of Supplier Relationship Management
By conducting supplier relationship management your team is truly prioritizing longevity. SRM focuses on creating long-term and sustainable relationships between procurement professionals and the vendors and suppliers with which they partner.
For more information on supplier relationship management, or anything procurement-related, keep browsing ProcurePort. ProcurePort is the internet’s premier place for anything procurement, from software and technology to information and knowledge, and everything in between.