How do you leverage your supplier network for competitive advantage?

1 What is SRM?

SRM is the process of managing the interactions and collaboration between your organization and its suppliers. It involves identifying, segmenting, and prioritizing your suppliers based on their strategic importance, performance, and potential. It also involves developing and implementing tailored relationship strategies for each supplier segment, such as joint planning, risk management, information sharing, and continuous improvement. The goal of SRM is to align your objectives and expectations with your suppliers and to create mutual value and trust.

2 Why is SRM important?

SRM is important for achieving various benefits from your supplier network, such as cost savings and efficiency through reduced waste and optimized processes, quality and reliability through clear standards and feedback mechanisms, innovation and differentiation through co-creation and co-development, and risk mitigation and resilience through shared information and risks. By leveraging these benefits, you can ensure that your suppliers deliver consistent and high-quality products and services that meet your specifications, access their expertise, resources, and ideas to generate new solutions, and anticipate and manage potential disruptions and threats to increase your agility.

3 How to implement SRM?

To implement SRM effectively, you should follow a systematic and structured approach that consists of four main steps: analyzing your current situation, planning your SRM vision and objectives, executing your plans and actions, and reviewing your SRM results. During the analysis step, assess your needs, goals, and challenges and collect data on your suppliers such as their capabilities, performance, and satisfaction. This will help you segment them into different categories. During the planning step, define your SRM vision and objectives and align them with your business strategy. Develop specific relationship strategies for each supplier segment and establish KPIs to measure and monitor outcomes. Execute plans by managing day-to-day interactions with suppliers, communicating regularly and transparently with them, and fostering a culture of trust. During the review step, evaluate your SRM results and performance, solicit feedback from suppliers and stakeholders, refine plans accordingly, celebrate successes, and share best practices.

4 What are the best practices of SRM?

To maximize the benefits of SRM, you should follow some best practices, such as beginning with a clear business case and securing senior leadership commitment. This will help to demonstrate the value proposition and return on investment of SRM. Additionally, it's important to adopt a cross-functional and collaborative approach that involves all relevant functions and departments in your organization. You should also focus on the long-term and strategic perspective, viewing suppliers as partners rather than vendors or adversaries. Furthermore, use technology and data to enable SRM by utilizing digital tools and platforms, as well as collecting and using data to inform your SRM decisions.

5 What are the challenges of SRM?

SRM is not without its challenges, such as resistance to change from internal or external stakeholders due to fear of losing control, lack of trust, or conflicting interests. Additionally, complexity and diversity can be difficult to manage with a supplier network consisting of hundreds or thousands of suppliers across different locations, industries, and cultures. Lastly, uncertainty and volatility in the business environment due to market fluctuations, technological innovations, regulatory changes, or natural disasters can create risks and opportunities that must be addressed. To overcome these challenges, you should communicate the benefits and rationale of SRM, engage stakeholders in the process, provide training and support, segment suppliers, tailor relationship strategies, leverage local knowledge and expertise, be flexible and proactive in responding to changes, and share information and risks with suppliers.