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Why You Need to Focus on Supplier Relationship Management

Managing both ends of the supply chain is extremely critical for the success of any organization. If you are only able to manage the demand side of the supply chain then you are setting yourself up for failure. If you have not given this a thought, then now is the time to sit up and pay attention.

Some Things to Consider

Organizations often ignore the supply side, and this undermines the crucial role that suppliers play in helping you achieve business goals.

Confused? Let’s try and understand this new dynamic. We will try and answer some of the questions you may have on who a supplier is, what is supplier relationship management, and why you should indulge in it.

Before we try and grasp this new concept of managing your supplier, let’s take a look at the other end. Why do you manage your relationship with your customer? One of the reasons is to keep them happy. You want them to come back and do business with you because you know their exact requirements. You want to improve your sales.

Now flip this concept on its head and try and look at your supplier also as your customer. Do you suddenly see them in a new light?

Do you look at them as being instrumental in keeping your customers happy? Do you feel they could help you in understanding what your customers need? Can you imagine the supplier being able to play a more significant role in helping you improve sales?

What if we tell you this is all possible with Supplier Relationship Management?

You need to look at the supply side of the business and stop considering it as just a routine activity. By routine, we mean you should stop looking at your suppliers as mere vendors from who you procure your requirements. Organizations often face problems with this outlook. And then comes problem-solving.

Organizations try to douse a fire only when they see one. You should stop looking at the problems you face on the supply side and relook at the suppliers as more than just vendors.

This means looking at them as strategic partners. Suppliers and their roles are to be evaluated for understanding their influence and contributions to organizational success. With globalization ushering in an era of across the border market places, performing Supplier Relationship Management takes on a whole new impetus for the organization.

Studies have highlighted the economics of having this new outlook towards your suppliers. Specific industries have reported positive linkages between higher supplier relationship management and profits.

How to do Supplier Relationship Management

To answer this question, it is essential to figure out for yourselves what kind of relationships you have envisioned for each of your suppliers. For this you have to classify the suppliers similar to how you do selective inventory control in your organization. Some suppliers will gain precedence over others. To understand this better look at it as the price, they are supplying products to you, but add to it, the value for the same.

Each relationship with different suppliers has different dynamics and needs unique navigation styles. Sharing data with your vendor (who is now also your strategic partner) will attain the utmost importance.

This is where technology comes in handy. Supplier Relationship Management can now be thought of as both a process and as a technology (software) enabler. How does technology become a great leveler? Usually, in the scheme of things, the onus is put on the purchase department or the procurement department to maintain relationships with the vendors/ suppliers.

With relationship management software, SRM is integrated right through the entire scalar chain.

What are the advantages of using technology?

Technology helps organizations quickly get the suppliers involved in their inbound and outbound activities. Suppliers can be screened, risks involved can be identified, and potential defaulters can be put on notice and even weeded out.

You are armed with such metrics to rate the performance of your suppliers. You will know who is performing according to your standards and who is not.
You are better able to control the volatility often faced with price fluctuations by having a robust Supplier Relationship Management and keep it to a minimum possible level.

Finally, having strong ties with your supplier helps you keep your costs from escalating. Keeping your operating costs in check goes a long way in building up the scale of operations, which only improve incrementally and continually.

For effective cost reduction strategies & efficiencies that will improve your bottom line, contact the experts at Benchmark Cost Solutions at this number – 02 9525 0777. If you prefer, write to us at this email address, and we will revert quickly.

Thanks for reading,
Benchmark Cost Solutions Team
02 9525 0777