Everything about Supplier Relationship Management (SRM)
In order to grow your business effectively, developing strong relationships with your suppliers and manufacturers is extremely important – and this goes far beyond financial transactions.
As an eCommerce business, a good line of communications can be mutually beneficial for both parties as you are both dependent on each other to survive in a highly saturated and sometimes overwhelming market.
In fact, maintaining your supplier relationships can be seen as a vital brand building tool. But, if you choose not to invest in your suppliers and develop these relationships, then you may do your retail company more harm than good.
With that in mind, what exactly is supplier relationship management? How can it benefit your business? What factors are most likely to affect your stakeholder relationships?
What is supplier relationship management (SRM)?
Well, long-story-short, supplier relationship management has one goal: To streamline and improve the processes between a buyer and its suppliers.
Essentially, developing relationships with your suppliers usually consists of any set of activities that is completed by an online business to identify, measure and improve the performance of suppliers and support the continuous improvement of its products or services.
Why should you choose to invest in your supplier relationships (SRMs)?
For starters, strong and stable relationships can prevent stock outs of the products you sell and help to prevent the discontinuation of products that you sell.
Different types of suppliers:
- Wholesalers and distributors
- Independent representatives
- Manufacturers and vedors
Just like customer relationship management (CRM) tactics, an effective SRM process helps you to build mutually beneficial relationships with your suppliers and create strategic growth.
Most important factors that affect SRM
This improves the coordination between your supply chain processes and enhances the level of supply chain integration. Additionally, it affects the performance of supply chain partners in terms of cost and service level. Sharing of information and good communication can save on business costs.
What’s the most important thing to remember is that good communication is key.
With this in mind, there is no build-up to develop a strong base for a relationship without sufficient communication. The performance of your supplier relationships largely depends on the effectiveness and appropriateness of the interactions you have with each of them.
Loyalty and Trust
Developing mutual stakeholder relationships that are based on trust and loyalty is just as important. The key to successful partnerships with your suppliers to make them feel like they are a part of your business.
But what exactly is trust? In my mind, it could be defined as positive attitude, belief or expectation of one party (i.e. the buyer) concerning the likelihood that the actions or outcomes of another party (i.e. a supplier) will be satisfactory.
Another important aspect that you have to keep in mind is that you have to listen to your suppliers. Listening to their needs and pain points can also go a long way in developing strong ties with your suppliers. A good line of communication tends to save time and hassle when things go wrong. The bottom line is that the more approachable you are, the more likely you will be to create good bonds.
The benefit of doing this is that you will have a higher likelihood of gaining the trust of your suppliers and foster a sense of open communication from both sides.
When commitment is encouraged within a business, the business develops a strong and collaborative work ethic and works together with other organisations to implement supply chain partnerships.
In other words, having partners that are committed to one another helps with the successful integration of an SRM process for a business.
Transparency in each other’s operations also helps to build trust and understanding in the relationship. Keeping channels of communication open ensures that you and your suppliers are on the same page.
Essentially, if you don’t want to lose your suppliers, the first step is making sure to pay them on time. This way, you will prove that you are a reliable customer and that you’re easy to work with. However, if you cannot make the payment on a date agreed for any reason, then inform the supplier as soon as possible with the date on which they can expect the payment.
Nothing is better for growing your profits than getting a quality service or materials for the right price. If you have the financial flexibility – use it. You can buy in bulk and get better pricing but you will have more stock on your balance sheet, or you can arrange to pay a vendor earlier in order to get a bigger discount. Honestly, sometimes it can be better to pay a little more because the supplier is giving you a better service which pays for itself in the long run. How? This is because you need to provide less time to manage them, or because they can be trusted to deliver directly to your customer.
With 2020 swiftly coming to an end (we are in September already!) and as market forces develop and technology evolves, the landscape of procurement and sourcing is changing as well. And as more companies outsource vital functions, such as innovation, security of supply and corporate social responsibility, maintaining a positive and long-lasting supplier relationship will be more vital.
Supplier Relationship Management can connect the global suppliers with the strategic interests of an organization to identify and drive previously untapped business potential. In the process, SRM creates a win-win situation for everyone.
This is why we believe that investing in supplier relationship management can be extremely helpful for your business, especially in the long-run. Even though you might not see the benefits today, in a couple of years you’ll be thankful that you’ve decided to invest in it.