Global Best Practice - Supplier Relationship Management
- Supplier Relationship Management
Also called vendor relationship management, supplier relationship management (SRM) is best described as a set of processes and tools that organizations can use to ensure they receive the maximum value out of their relationships with suppliers. The two main elements of SRM are clear communication between the supplier and buyer and the objective of understanding, agreeing, and (when possible) codifying the interactions between the supplier and the buyer. To be effective, SRM needs to have a clear understanding of which suppliers are the most strategically important to the organization and which are less important. Organizations should consider more than just how much money is spent on a supplier when making these determinations. This practice includes additional factors organizations should consider when determining how valuable each of their suppliers is to their organization. Other important things to consider for effective SRM include developing an organized structure for managing suppliers, having an established formal supplier and organization development program in place, supporting performance improvement, and holding regular reviews with suppliers to ensure that the needs of both the supplier and the buyer are being met.