The relationship with suppliers is key for Supply Chain leaders as this allows them to obtain key results, such as optimizing costs, guaranteeing the flow of the Chain and innovating in their processes.
This has generated changes in the management of relationships with suppliers, based on proactivity to build a long-term relationship that offers two-way benefits such as: process improvement, search for solutions, risk mitigation and taking advantage of innovations. to maximize customer value. For this reason, the concept of SRM is gaining more strength every day.
What is SRM (Supplier Relationship Management)?
This approach allows you to evaluate the suppliers that supply goods and services to an organization, determining the value of each supplier to detect which are the most critical for business continuity . This allows us to generate strategies to cultivate relationships with suppliers to build their loyalty, work effectively and improve their performance.
Some objectives of the SRM are:
- Help Purchasing teams achieve and exceed their objectives.
- Foster performance-oriented relationships.
- Achieve continuous improvement, cost optimization and innovation.
- Better manage risk with suppliers.
- Implement long-term strategies for categories.
- Achieve KPIs in the different business units.
- Facilitate diversity, inclusion and sustainability in the supplier network.
Four steps to efficient SRM
- Supplier segmentation
Supplier segmentation is the foundation for effective SRM. In this step it is important to use one or more criteria to group suppliers according to business impact and market complexity .
In the first aspect, there are factors that must be measured, such as: annual spending, criticality of the business and availability of other suppliers. The complexity of the market takes into account aspects such as changes in supply sources, complexity of the Chain, ease of substitution and volatility of supply and demand.
We advise you to build a Kraljic matrix with the different criteria. In this article encontrarás una guía para hacerlo.
- Evaluate supplier performance
In this phase it is important to determine metrics for performance evaluation, keep records of performance evaluations, collect data and conduct periodic reviews of suppliers.
We advise you to have a solution that allows you to measure, analyze and manage supplier performance. This will provide you with a clear structure to track supplier performance based on previously defined KPIs and metrics.
- Prioritize continuous improvement and innovation
In this step it is key to analyze the costs for optimization. Likewise, it is necessary to evaluate the quality and improvements that the service has had, plan strategic reviews with the main suppliers and establish annual follow-ups.
- Implement plans to mitigate risks
Organizations must have a plan to evaluate risks linked to suppliers. This includes having a matrix that serves as a reference to evaluate each case, developing mitigation plans and implementing monitoring systems that provide alerts and reports regarding possible risks.
Source: GEP.
