Ten Steps to Designing an Effective Supplier Relationship Management Program

Supplier relationship is important in order to serve customers responsibly and reliably and maintain
the cost effectiveness and manage assets effectively at the same time. Minimize inventory
investment and lower transaction cost together with differential/competitive advantage and expand
globally should be included as strategic goals in the organization. To meet these two major goals,
successfully serving the customers and achieve strategic goals, Supplier Relationship Management
(SRM) become important program for effective collaboration and supply chain synchronization
with the suppliers. Four major components in order to have successful SRM programs:
methodology, collaboration and supply chain synchronization, technology processes, and
measurement and rewards. Each of these component has its own components.
Methodology
- to improve supply chain effectiveness and customer service, partnering with suppliers and
integrating supplier relationship into strategic sourcing initiative is a must.
- cross functional teams in supplier relationships involved within cross-functional strategic
initiatives in corporate goals must be align with SRM.
- entire organization must recognize and support the supplier relationship initiative.
Collaboration and supply chain synchronization
- time, trust, mutual understanding, regular and consistent communications, mutual commitment are
required in order to establish a long term-relationship.
- identifying and categorizing spend characteristics, then implementing initiatives across a
rationalized supplier base must be included in building supplier relationship framework.
- continuously improve supply chain effectiveness and customer service need to develop mutual
capability and integrated strength by working with suppliers.
Technology processes
- standardized processes and supports in strategic supplier relationship
- collaborative environment needs identification and implementation of tools/technology and supply
chain partners to work together.
Measurement and rewards
- suppliers and stakeholders collaboration must developed and set effective metrics.
- to ensure SRM programs success and drives result, measurement and rewards must be enforced

internally.
SRM become important to achieve strategic goals and to serve the customers effectively and
efficiently. Effective and efficient SRM gives several advantages:
- eliminate redundant supply chain processes and assets (example QA processes, Distribution)
- joint design or redesign for product specs can achieve high efficiency.
- reduction of inventory levels
- shift inventory to suppliers
- reduction of capital expenditure by shifting or sharing with suppliers
- faster product development cycles, will result faster time to market
- better customer and marketplace insight
- technology, processes, and product innovation become better.
- joint marketing activities and advertising make better cost-gain trade off
- have wide access to penetrate new markets
- use suppliers as customers and channels for better value.
- improved value-chain forecasting and response
- improved quality and speed of decision making
- reduced time and effort in scope management
- enhanced service quality, responsiveness and flexibility
- reduction in errors and conflicts
- reduced time spent on selection and contract negotiation
- streamlined management on orders, fulfillment, rebates, etc.

As conclusion, SRM is very important to achieve strategic goals and to serve customers and
management must view SRM as a source of competitive advantage and not as cost center.