New focus on supplier relationship management

Supplier Relationship Management (SRM) may be staging a comeback, as companies seek new ways of mitigating risk and controlling costs.

According to a new report by Source One Management Services, LLC, supply chain managers are again realizing the value of extending the value relationship.

“Suppliers can be neglected during the course of their contracts,” says Brad Carlson, director of Source One’s Supplier Management practice. “And though some companies have an informal supplier management process, it usually lacks the formality and processes to drive success. With SRM, a business can not only benefit from the initial sourcing phase, but also help suppliers remain proactive and engaged to drive collaboration so that they are able to add to the sustainability and profitability of your organization.”

The recently-published report, “Building the Case for Supplier Relationship Management,” maintains that such a focus can directly plump up an organization’s bottom line.

“Our paper suggests ways for supply chain managers to ‘operationalize’ the process,” says Carlson. “While the SRM concept has been around for some time, we feel that many companies have failed to use it at its full potential.”

According to Carlson, the initial capital outlay does not have to be large, as “pilot programs” can be introduced to explore the gaps in supplier management. This can “stratified” to include a company’s IT, finance, and procurement divisions.

“There has to be a complete management ‘buy in’ for this to work properly,” he says. “Every level of authority should be brought into the process.”

But SRM is not without its skeptics.

Robert A. Rudzki, a former Fortune 500 Senior Vice President & Chief Procurement Officer, who is now President of Greybeard Advisors LLC, says that to portray SRM as some sort of distinct, separate process adds unnecessary complexity in a world where simplicity pays big dividends.

“If you feel tempted by the SRM sales pitch, first audit your core supply management and sourcing processes,” he cautions.

Rudzki says the best strategic sourcing processes he’s encountered embed the essentials of what is now being referred to as “SRM” – and do so as part of an integrated and strategic business process, not a standalone SRM project.

The Source One SRM Insights Report can be downloaded at http://www.sourceoneinc.com/downloads/SRM-Insights-Report.pdf.