« Back to Glossary Index Show
What is Supplier Relationship Management (SRM)? - DefinitionSupplier relationship management (SRM) is a methodical approach in which businesses segment their suppliers and identify key supply categories in order to develop a strategy for effectively managing all of their suppliers and supplies. Supply chain professionals that interact with suppliers on a regular basis in areas like procurement, project management, and operations use supplier relationship management. Supplier relationship management includes three main steps: supplier strategy development, supplier strategy execution, and supplier segmentation. The SRM discipline aids in determining the value that each supplier delivers, and also which ones seem to be the most crucial to the business's continuity and success. It also allows managers to develop stronger relationships with suppliers depending on the importance of each one. Challenges in Supplier Relationship ManagementThe following are some of the challenges that can hinder supplier relationship management:
A Brief History of SRMPeter Kraljic, a director at the consulting company McKinsey & Company, is credited with the creation of supplier relationship management. In a September 1983 Harvard Business Review article titled "Purchasing Must Become Supply Management," he advocated segmenting the supplier base and mapping it against 2 important dimensions: profitability and risk.
This requires a fundamental shift in mindset: from purchasing (an operational function) to supply management (a strategic function)." Others developed SRM based on Kraljic's core premise, and the discipline has made advances as technologies and procedures have changed and matured. ConclusionSome vendors are more important than others in terms of operational excellence, business continuity, scalability, and, ultimately, profitability. For eg, a computer manufacturer's office stationery supplier has minimal impact on profitability, but its main electronics supplier does, making it a critical strategic partner. Any threat to the operations of the electronics manufacturer is a huge threat to the computer company. Although essential suppliers vary by industry and each organization has its own mix, the ultimate purpose of SRM remains the same: to streamline and optimize the processes that occur between the organization as a consumer of products and services and the businesses who supply them. Explore Additional Resources To Know More« Back to Glossary IndexWhat are the three main activities involved in supplier relationship management?Supplier relationship management comprises of three important steps: supplier segmentation, supplier strategy development, and supplier strategy execution.
What are the three different types of supplier relationships?The study considered three types of buyer–supplier relationships; which are transactional, collaborative and strategic alli- ance relationships.
What are the activities involved in supplier management?What are the supplier management activities?. Evaluating and selecting suppliers.. Developing and maintaining supplier relationships.. Negotiating contracts and pricing with suppliers.. Managing supplier performance.. Resolving issues with suppliers.. What are the components of SRM?Components of SRM. Organizational structure.. Governance.. Joint activities.. Value measurement.. Systematic collaboration.. Technology and systems.. |