supplier relationship management

We can also refer to supplier relationship management as SRM. Supplier Relationship Management is a systematic approach to reach out to the supplier and build a strong relationship with them.

Goal of SRM

Before understand the goal of SRM we should need to understand the meaning of supplier. Supplier means those people who supply raw material in the company. If a company has good supplier relationship management, then there can never be a shortage of raw material in that company. For example- A company manufactures laptops. The raw material for manufacturing a laptop is chips, wire, steel, plastic etc. If the company’s relationship with the chip supplier is good, then the company will not face the shortage of chips and other problems related to chips.

Goal of supplier relationship management: Every business needs raw material on time to deliver its manufactured goods to its customers on time and the company tries to improve its relationship with the supplier to avoid all conflicts related to raw material.

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Benefits of good supplier relationship management to the company

  • Always availability of raw material on time
  • getting extra discounts from supplier
  • Taking raw material in advance without payment
  • Emergency delivery by supplier whenever goods are exhausted
  • If there is any problem related to raw material, then get it resolved as soon as possible by the supplier
  • Finding out more information about raw materials
  • Getting help deciding which raw material would be best for the company

Process of supplier relationship management

We can separate the process of supplier relationship management into three phases:

1) Segment your suppliers: This stage means splitting your suppliers into two parts. The first is the suppliers who provide the raw material to the company at a low price and the second is the supplier who is providing the raw material to the company at a high price. After splitting the suppliers, the company starts ordering raw materials to those suppliers who provide the raw material to the company at a lower cost.

The category of division varies from company to company. Companies segment suppliers by item, quantity, location and price. Every organization has a huge supplier base. The company needs to find out which suppliers are more important to the company and which suppliers are less important to the company’s success.

2) Creating a supplier strategy: After segmentation, The company formulates such a strategy which proves beneficial for both parties. In strategy, the company takes steps that are beneficial to both the buyers and the suppliers.

3) Monitor the strategy: In this phase the company continuously monitors the strategy to check whether it is performing well as per the plan of the company. If not, the company makes some changes to allow the strategy to work as planned. If yes, the company will continue the supplier strategy.

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