If supplier performance is to be successful, the relationship as a whole must be managed. SRM, or supplier relationship management, is an organised approach that looks at every interaction with a focus on maximising long-term value. SRM is the key to realising the full potential value of supplier contracts.

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What are the benefits of SRM?

A successful programme needs top-level commitment, investment, the willingness to take risks and a lot of patience. Companies can reap the most benefit from SRM by applying it to their key suppliers only and putting the right level of commitment into making it work. This can lead to many advantages:

Innovation: partnering with suppliers on new technologies can mitigate risks and spark creativity in exploiting synergies.
Decreased costs: in the long-term, big savings can be made in terms of reduced effort in sourcing different suppliers and favourable pricing.
Efficient P2P: particularly in accounts functions such as invoice matching and inventory management where both companies can benefit from reduced inventory; for example, by using JIT processes.
Improved quality: a more consistent service can be achieved as a greater understanding develops as a result of the partnership.
Leverage of supply chain staff: increased trust shifts the balance to a more collaborative way of working.

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A study by the Hackett group published in 2011, showed that top SRM performers received annual benefits of around three percent of their total spend with a supplier through reduced costs, innovation and new business.

If you would like to find out more about supplier relationships or vendor management there are many companies that can help, such as https://www.contractswise.com/, or there is plenty of useful information online.

Best practice in SRM

Some of the key features of an effective approach to supplier relationship management include:

Supplier qualifications: suppliers are classified by various performance rankings and scorecards.
Supplier rationalization: increasing strategic value by consolidating spend with certain suppliers
Supplier feedback and communication: for example, a help desk for support and the resolution of ongoing issues, easy access to policy and procedure documents, and feedback surveys
Clear policies and governance structure
Business continuity planning: an agile response to unforeseen events is encouraged.
SRM technologies and software

Bearing these key features in mind will no doubt lead to a great supplier relationship in the future.