Supplier Relationship Management (SRM), a term first popularized in the late 1990s, refers both to an overall approach to procurement similar to Strategic Supplier Management and to a category of supply chain software that supports a more comprehensive approach to supplier management.
In either case, the results from SRM, in general, are viewed as decidedly mixed, with many companies embracing SRM strategies and technologies, but real results from those initiatives not crystal clear.
What are the keys for companies that are having success with SRM strategies?
Mark Webb and Jonathan Hughes, consultants at Future Purchasing and Vantage Partners, respectively, tackled that subject in a recent article in Europe’s CPO Agenda magazine. They have identified a number of keys to success based on one-on-one interviews with SRM leaders (22 companies in total).
“In all companies, it was clear that individual and organizational attitudes and behaviors were perceived to be of equal importance to tools and mechanisms [with respect to SRM success],” Webb and Hughes write. “However, tools were seen as a valuable means to improve the quality of interactions between the buying and selling organizations and a number were consistently identified as key for unlocking supplier value.”
The six keys Webb and Hughes found for SRM success are as follows:
- Supplier Segmentation: The most common SRM strategy is to segment supplies and identify a subset of those as “strategic. The most frequently used segmentation criteria, according to Webb and Hughes, are spend (historic, forecast or both), value opportunities, dependency, risk and business impact, account attractiveness and relationship complexity.
- Relationship Governance: For SRM success, it is critical that companies clarify and document roles, responsibilities and interfaces on both sides of the relationship. “The most common approach is for category managers to take responsibility for the commercial management of a number of the key suppliers within their category portfolio, with operational management undertaken by business stakeholders,” Webb and Hughes say.
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