SRM Series: #3 Defining SRM

Clients often tell me they start out confused about what is meant by SRM – supplier relationship management. Is it about emotionally intelligent collaboration? Contract management? Performance management? Supplier development? Or something more aspirational, like ‘alliance-building’?

For another definition, how about ‘post-contract value management’? This is the task of ensuring that the buying organisation not only gets what it contracted for, but that additional value is secured through perpetual systematic supplier management practice.

Despite working in the SRM field intensively for more than 20 years, being able to identify those that have achieved the highest standard of SRM is a challenge, certainly beyond the usual suspects in automotive and aerospace. Yet everyone seems to be having a go.

Here are a few pointers for those that are aiming high:

  • Sustainable SRM only really works when there is a high degree of independency between the ‘partners’. Choose wisely which suppliers you’ll include in your programme.
  • The organisations that do it well are those that have to. For them, switching suppliers is either a prohibitively costly or time-consuming affair (for example aerospace, some pharma, automotive). Be realistic.
  • SRM among the best organisations is a ‘whole enterprise’ competence. Enthusiastic cross-functional working is a critical success factor.
  • Achieving and sustaining top management interest and support is a tough challenge, both at a programme level and in relation to specific suppliers. But these are essential if the SRM practices are not going to wither.
  • IT solutions can help, but are categorically not the panacea. Consistency of application is rarely, if ever, achieved. You just have to look at the experience of firms using CRM systems. Many simply revert to being used as contact databases. Tread very carefully before you commit to six or seven figure investments in such technology.

To make a success of SRM, you don’t need to be a ‘relationship junkie’. Many SRM-aspirants focus on collaborative behaviours, partnership-working and the like. What is needed is hard-headed facilitation skills, based on a comprehensive grasp of the theory, best practice, and demonstrable experience of implementing SRM for real. In my experience, that blend remains difficult to source.

If the organisation is focused on the few relationships that really matter, and is in it for the long haul, then SRM excellence can be achieved. Just don’t expect miracles.

This blog was first published in Supply Management magazine in June 2011.

By David Atkinson

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