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Focus: Sourcing/Procurement

Feature Article from Our Sourcing and Procurement Subject Area - See All

From SCDigest's On-Target e-Magazine

Oct. 26 , 2011

Supply Chain News: Keys to Supplier Relationship Management Success


The Five Work Streams that Must be Managed; Changing the Culture to Support Supply Collaboration and Respect


SDigest Editorial Staff 


The term supplier relationship management has been around for more than a decade, sometimes related to a class of software (though the term is not used nearly as much today for such software as it was in the early 2000s), sometimes for an approach to how a company might work with its supply base.

SRM is sometimes also used in the same context as strategic sourcing. In a report earlier this summer from CAPS Research, an arm of the Institute for Supply Management, SRM at its core was defined very simply: efforts to (1) improve working relationships with suppliers generally; (2) extract more value from those relationships.

SCDigest Says:


Hard work may be needed to change procurement cultures that are resistant to supplier collaboration and trust and building strong relationships within other areas within the company.

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The report (Supplier Relationship Management: An Implementation Framework, available with registration at the CAPS Research web site) notes that some companies manage to create a culture of SRM and success, while many if not most other companies are much less consistent, and tend to pursue such improvements in SRM periodically, without sustained and substantial results.

The nearly 100-page report was produced by Robert Monczka and Thomas Choi of Arizona State University, Yusoon Kim of Georgia Southern, and Casey McDowell of CPM International. SCDigest will summarize key elements of the research in this article and in subsequent weeks.

The research has identified five "work streams" that it says are key to effective SRM programs. Those are:

1. Supply base rationalization with family/supplier segmentation: Overall reductions in the total number of suppliers and then more granular rationalization by specific strategy segments and individual purchase categories. The goal in the end is to produce a smaller, higher performance supply base.

2. Supplier management: Development of a strategic sourcing strategy and short and longer term procurement strategies by purchasing area.

3. Relationship management: Taking relationships with key suppliers to the next level through information sharing/transparency, trust building programs, and equitable joint efforts/programs.

4. Buyer/supplier development: Active programs to overcome barriers to performance on both the buyer and supplier sides of the equation, which drive continuous improvement.

5. Supply performance measurement and management: Getting the metrics right and effectively and consistently using that insight for improvement.


The 12 Keys to Success

The research report identified 12 key factors for SRM success. Those factors are:

1. A consistent approach that encompasses all of the work streams identified above in an integrated way. There is no silver bullet.

2. While SRM can be approached as an initiative with a beginning and an end, the greatest success comes from building an approach to SRM that becomes a way of doing business.

3. Executive support (of course) - executives must be committed, and "walk the talk."

4. Clear linkage of SRM goals to overall business goals, with SRM's contribution to those goals tracked quantitatively and qualitatively.

5. Adopting a total cost-value approach to decision-making. A focus primarily on year over year savings will limit SRM potential.

6. As needed, hard work to change procurement cultures that are resistant to supplier collaboration and trust and building strong relationships within other areas within the company.

(Sourcing and Procurement Article Continues Below)





Source: CAPS Research


7. Similarly, treating suppliers equitably, with meaningful respect; sharing in risks and rewards.

8. Talented procurement staff who are capable of building advanced relationships and managing the five SRM work streams effectively.

9. Investment in procurement technology, organizational structure, and staffing sufficient to carry out real SRM strategies.

10. Continuous investment in education for buyers, other internal stakeholders, and suppliers on the goals, principles and practices of effective SRM.

11. Setting high expectations for results, focused on how true SRM can achieve breakthrough results that cannot be achieved by one side of the equation alone.

12. Recognition that SRM may drive the most relative value for companies in which price-focused supply management improvements have leveled off.


We'll provide more detail on the research and recommendations for this report in coming weeks.


What do you think are the keys to SRM success? What do you think of this research? Let us know your thoughts at the Feedback section below.

Recent Feedback

I like the approach but feel there is a lot of overlap in steps 2-4. With established relationships. there are 'four buckets' I like to work to:

Segmentation (category analysis and tool based approches such as Kaljic)
Governance (structured two-way engagement and relationship management)
Measurement (KPI and reporting on key areas, perhaps relationship performance and commodity performance - production vs. relationship)
Review (Embed the process with 360 degree review, flexing tools and resources to seniority of supplier and importance of commodity)

Daniel Franks
Glaxo Smith Kline
Jun, 09 2014