Analyst Insight: Supplier relationship management (SRM) is particularly crucial in today’s world of supply chain upheaval. Development of SRM tools using artificial intelligence and other advanced technologies is rapidly proliferating, but supply chain organizations shouldn’t forget to personally nurture supplier relationships in order to position themselves as co-collaborators in the success of their key vendor partners.  

Supply chain disruptions and shortages have many organizations paying closer attention to their supplier relationships. SRM systems have traditionally been implemented primarily to improve supplier reliability and reduce risk, and that goal remains unchanged. But APQC has found that in the post-pandemic years, organizations are prioritizing SRM less as a contract compliance tool and more as a way to become a customer of choice.

While advances in AI and other emerging technology can help smooth operational challenges and enable data-driven decisions, supply chain organizations should avoid the temptation to become so focused on digital tools that they forget the “relationship” side of supplier relationship management. 

To incentivize suppliers to innovate, pursue efficiency, and align with your organizational goals, it pays to keep the following in mind as you plan your SRM efforts and resources.

Plan strategically. Segment the supply base according to which suppliers are most vital to your bottom line, and how closely your interests align. Would you characterize the vendor relationship as purely transactional in nature, or marked by more of a relationship-based interest with mutual goals? 

Segmentation and clarity around objectives help you plan how to focus resources, time and attention. The more investment-worthy the relationship, and the more vital the product is to your business activities, the more it makes sense to devote resources to personally affiliating with your key supply chain partners.

Think collaboratively. Learning about your vendors’ goals and needs allows you a better platform for negotiating. It also provides crucial intelligence about what outcomes are important to your suppliers, so that you can begin to create opportunities to link their success to yours. This understanding requires a level of trust that is built on personal rapport and enhanced by hands-on relationship management.

Established relationships and regular communication give each party a feedback loop, and are the vehicle with which you can create a common vision and come to mutually agreed-upon ways of working together as successful partners.

Present a united front. Remember to apply collaboration as a guiding philosophy for your internal processes as well. To design mutually beneficial arrangements, your procurement team should work in tandem with your legal department and others in the organization to set contract terms that go beyond merely limiting liability or risk, but also move toward creating value for your suppliers.

Diversify. Although nurturing mutually beneficial vendor partnerships can provide a level of innovation and competitive advantage, one caveat remains: Don’t become so dependent on one supplier that it can make or break your ability to do business. Diversify your collaboration and relationship-building efforts in a way that pursues and preserves collaboration goals, while protecting the resilience of your supply chain against future unforeseen disruptions. 

Outlook: Advances in AI and automation will continue to provide enhanced tools for making decisions and driving supply chain transparency, but the human element is still an important competitive advantage when it comes to remaining the customer of choice for your vendors. Rather than focusing solely on cost control, aim for collaboration and creating a win-win for your key suppliers. Facilitating their success helps ensure yours. 

Resource Link:

www.apqc.org