What is Supplier Relationship Management (SRM)?

Supplier Relationship Management (SRM) is a coordinated practice within a business to engage with third-party service and product providers to maximize their benefit to the company’s objectives. In an economy where there are many external dependencies that drive execution, businesses rely on suppliers (a.k.a. vendors) to provide finished goods for sale, complete tasks, or materials that are used in a company’s finished products.

Example of Supplier Relationships

Material suppliers and finished goods suppliers are the most prevalent for traditional companies. These are often manufacturers or producers that offer products to a business. For example, if the company makes cars, a tire manufacturer provides finished tires to be installed in those cars. They may also engage with a material supplier that provides the aluminum for a part that the auto company must forge into making their car.

Often, the relationship with those suppliers is managed by the product or procurement teams in an organization. They often need to fit a certain specification or have negotiated terms to meet the “supply chain” needs of an organization.

Service-based suppliers are known by many terms: contractors, consultants, freelancers, agencies, professional services, etc. These are professionals who provide specialized labor to drive execution. Anyone from a team that designs your website to someone who comes to water your plants each week would be a service-based supplier.

With the advent of digital economy companies, service-based suppliers are available for just about any task or project. Driving, deliveries, promotion, and marketing, programming, voiceovers, research, etc.

Why Supplier Relationships Matter?

Supplier relationships can either make or break a business that is in a competitive space—therefore how your suppliers perceive your business is critical. Having reliable, trusted suppliers:

  • Ensures or reduces time-to-market
  • Ensures the best terms/price/value for needed products and services
  • Ensures availability that affects corporate revenue for its own products and services
  • Enables focus on core innovation and strategies by offloading non-core activities/products

What Supplier Relationship Management Challenges Exist?

Like most processes with external parties, there are inherent challenges. Competition for suppliers that are offering unique quality products can be fierce. These challenges are dramatically increased with suppliers who are cross-border.

Knowing Your Supplier
Supplier Engagements
Will the supplier be a good partner? Are they a legal entity that can be paid? Are they solvent? Do they offer favorable terms? Do they value the relationship with your company? Can they do what they say?Has the supplier provided all necessary paperwork to start the relationship? Have they met the terms of the agreement? Does the supplier continue to provide value? Are there disputes or issues related to working with the supplier? Are there communication challenges?

Additional Resources

To learn more, be sure to download PayStream Advisors’ Q4 2016 Supplier Information Management Report. Beyond understanding the industry trends around SRM and how to source SRM solutions, there is useful, actionable information on ensuring suppliers participate in the new way of operating. SRM is a two-way interchange between the supplier and your company and requires the supplier to participate. See pages 12 and 13 for more on onboarding and management strategies.

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