PurchTips edition #447

Supplier Relationship Management refers to the management of the interactions between suppliers and buying organizations. All buying organizations have SRM. The nature of buyer/supplier relationships varies from organizations to organization.

The following are characteristics of an effective SRM Program:

1.   Customer Requirements Focus

Proactive and Forward-Thinking Organizations underpin their operations and systems by their Critical Customer and Shareholder Requirements, which serves as the input criteria for supplier selection processes. These requirements also serve as inputs for contractual agreements and remedies.

2.   Total Cost to Serve Focus (TCTS)

Total Cost to Serve is the identification of the cost of servicing customers at the product and customer levels. (SPSM4 Executive Leadership Course, 2019). The primary objective of Total Cost to Serve is the configuration of business and procurement systems to deliver customer requirements in the most cost-effective manner. Leveraging TCTS requires managing and ensuring supplier capability to effectively contribute to realizing customer and shareholder requirements.

3.   Risk Mitigation Focus

The execution of Risk Management Strategies is a critical dimension of the Procurement Function. Effective

GSRM Programs ensure that only low-risk suppliers are selected and continue to pose low risks level to supply mechanisms. The degree of ongoing risks that supplier activity poses to buyer supply chains are a major component of supplier performance scorecards and a key determinant of the continuation of future business.

4.   Leverage of Supplier Innovation Capabilities

Managing supplier innovation capabilities are one of the most important aspects of Global Supplier Management Systems. It addresses all aspects of collaboration to facilitate the transfer and leverage of supplier intellectual property, know-how, and process capabilities to buying organizations. The creation of a win-win position is at the core of GSRM systems. Collaboration, customer and stakeholder requirements focus are the hallmark of an effective GSRM initiative.

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