Does this look familiar to you?
Does your experience of Supplier Relationship Management (SRM) consist of complicated monthly Excel sheets that are always out of date? Monthly meetings reviewing historical information with no focus on the future? And finally, do you only talk to suppliers when things have gone wrong?
If this is you, it’s likely you need help in transforming those crucial relationships to improve your business overall.
But is this a problem and why might you not even know it’s a problem?
Often with small to medium-sized businesses, supplier relationship management is an easily managed process, consisting of a one-to-one conversation that will usually solve issues quickly. This close contact expands both supplier and buyer knowledge and reaffirms the relationship.
However, as businesses get bigger they have more trouble creating and retaining such a close, positive and productive relationship. supplier relationship management (SRM) becomes one of those easy-to-overlook areas. You may not have given much thought to how inefficient and ineffective SRM processes might be impacting your business’s success.
However, the evidence speaks for itself.
- One recent study found that Ford, General Motors, FCA and Nissan inclusively lost out on over £1.5 billion in 2014 because they had a poor relationship with their suppliers. If their supplier relationship management (SRM) had progressed as much as Toyota’s and Honda’s did, they wouldn’t have lost out.
- Bowling Green State University explored the effect of supplier relationship management (SRM) on suppliers and businesses. They found that effective communication, sharing information within and between firms and supplier development are integral to improving a buyer’s performance.
Why hadn’t anyone told you this before?
It’s widely known that supplier relationship management (SRM) is an important process in reducing risk and regulating compliance; it is there for when things go wrong.
However, supplier relationship management can also function as a driver of opportunity and innovation. Suppliers can help identify opportunities to improve products, offer different products and make products for the future. The challenge is that many businesses don’t know where to start. In truth, with a bit of help, it’s actually very simple and we can help. Click here to find out more about reducing risk in your business.
Ok, but what can I do?
We will help you classify your suppliers as Strategic, Business Essential, Leveraged and Routine.
We’ll make sure you understand how important you are to these suppliers (it’s not always an equal relationship!) We’ll help you focus on the Strategic and Business Essential suppliers to build the right relationship. For strategic suppliers, we’ll help you to build a relationship that focuses on how you can grow your businesses together.
But why is this worth the investment? Research has shown that companies with best-practice supplier relationship management (SRM) consistently outperform other companies. Why? Because of the innovation that comes from working hand-in-hand with your most important suppliers. The trouble is these relationships get lost in the weeds of the day-to-day.
Of course, we don’t drop the ball with the rest; for routine suppliers, we’ll help you to manage risk and keep business flowing well. Ultimately, we will help you build a simple low-effort process for managing all suppliers, with emphasis is on acquiring the benefit from the relationship with that supplier.
What will help implement the above?
Life would be so much easier if the supplier came straight to you and told you about an exceptional new feature that would solve all of your product and supply chain issues.
However, that level of supplier support is unfortunately rare. The reality of most supplier relationship management (SRM) reflects the focus on repetitive conversations concerning quality, payment and deliveries.
What can you do about it?
Start by assessing all of your suppliers in a systematic way to determine which ones are strategic and business essential to you, then classify the rest as leveraged or routine.
Once all your suppliers have been categorised, you can focus on developing an even more successful relationship with your critical suppliers. This includes creating time to talk about future opportunities, people and important details benefitting both yourself and the supplier. This will end the continual conversation loop on delivery logistics and free up time to discuss future products and opportunities. Strategic suppliers should represent at least 40-50% of your supplier relationship management (SRM) time.
How will you allocate supplier relationship management time to the others?
- Business Essential – a scaled-down version of critical – they require focus – maybe 20-30% of your time
- Important suppliers- Spend a lot of time and effort.
- Leveraged – Focus on how you can reduce cost and maintain service – 10-20%
- Routine supplier – just monitor what they’re doing. You only want to know about them if there’s a problem. These should be no more than 10% of your time.
You may have begun reading this article thinking you supplier relationship management wasn’t problematic. Maybe it’s working really well. But maybe you’ve changed your mind?
Whatever your conclusion, one fact remains; improvement is always possible. The evidence clearly correlates supplier relationship management improvement with an increase in profitability and innovation. So, what are you waiting for?
At Bromley Wood Associates we have considerable experience in helping businesses to assess, manage and prioritise suppliers so that you can not only manage risk and compliance but, more importantly, drive innovation to help grow your business. If you would like to speak to us more about Supplier Relationship Management and how you can improve it in your business, contact us today.