There are a myriad of definitions of supplier relationship management (SRM), but in simplest terms, SRM refers to the systematic approach used to evaluate vendors or third party businesses that supply goods, services and materials to an organization, identifying suppliers that are critical to the organization’s success and implementing a strategies or a system to manage and maximize the value of those relationships and improve their performance.
The SRM discipline enables you to evaluate and determine the value delivered by each supplier and those that are more critical to the business’ performance and continuity. Additionally, it allows managers to cultivate more effective relationships with their suppliers based on each supplier’s contribution.
Supply chain professionals often rely on supplier relationship management to transact with suppliers in various ways including procurement, operations and project management.
Also referred to as supply chain relationship management, SRM is one of those disciplines under the umbrella of supply chain management. It’s considered similar to procurement processes and vendor management though there are some notable differences.
For example, vendor management mainly focuses on creating costs and service-level agreements between a given business and its vendors while procurement is just about purchases and features processes like invoicing, ordering, contracting and paying.
Goals of supplier relationship management
It’s obvious that the categories of critical suppliers of different industries differ and each organization boast a unique mix but regardless of this, the fundamental goal of SRM remains one: to streamline and improve the processes that take place between the organization as the purchaser of products and services and the businesses that supply them.
Just the same way customer relationship management (CRM) is designed to streamline and improve the processes between a company and its customers, SRM also aims at developing a mutually beneficial interaction between the enterprise and its suppliers, particularly those considered most valuable to the company’s brand.
It also aims at promoting efficiency, quality and innovation. The goal of a well-established SRM discipline is not just to save costs but also to maximize the value of suppliers so as to achieve a competitive advantage in its marketplace.