Supplier relationship management

  • Published on: 8 June 2015
  • By: Admin

Some confusion exists over the difference between Supplier Performance Management (SPM) and Supplier Relationship Management (SRM).

SPM confirms that the supplier is delivering what has been promised in the contract - suggesting a narrow, one-way process implemented by the buyer. SRM, by contrast, is about working in close collaboration with strategic suppliers that are able to flex their solutions/services as business needs change. This approach results in achieving lower costs, reduced risk, greater efficiency, better quality, access to innovation and ultimately mutually beneficially long-term partnerships.  It starts at the point of initial contract negotiation and agreement, followed by supplier management throughout contract implementation and lifecycle.

Despite an increasing number of organisations embracing SRM for the first time, many are still implementing programs with insufficient skills or capabilities at their disposal. So, if you are an organisation that has an SRM arrangement already in place, or is thinking of launching one, this might be the right time for you to review how your contract management is operating.

SRM is a central approach towards optimising the value of customer procurement. A buyer cannot control suppliers, but can influence the relationships with the suppliers. SRM is a strategy to build two-way relationships with strategic suppliers, requiring collaborative working to provide innovative and flexible customer solutions. This allows the customer to evaluate and manage supplier capability, whilst jointly solving problems. The main objective is for a supplier to fully understand a customer’s business and bring fresh ideas to the table, adding value to any operation. These ideas often include service enhancements, cost reductions and usually involve shared gain.   

Service Delivery Management (SDM) teams are tasked with providing post contract excellence, regardless of the size and complexity of activities or contract deliverables. However the SDM is usually a supplier employee, who is remunerated on customer satisfaction. The SDM will professionally manage the customer’s expectations by maintaining and improving service qualities from the point of contract negotiation and agreement, through to monitoring, reporting and reviewing Service Level Agreements (SLAs) and Key Performance Indicators (KPIs). These ensure that the actual service levels are achieved against the set targets. These set targets should be contractual and not just referenced in proposals and sales materials. Failure to meet SLAs and KPIs should have associated service credits.

SDM teams provide a wide range of services that are tailored to the individual needs of each customer including, but not limited to:

  • Contract negotiation
  • Client integration
  • Service reports and reviews
  • Escalation management
  • Problem management
  • Change management
  • 3rd party vendor and partnership management

Value Management

SRM delivers a competitive advantage by harnessing talent and ideas from key supply partners and subsequently translating them into product, service offerings and new contractual mechanisms. However, monitoring performance and identifying areas for improvement is a joint, two-way performance scorecard. A balanced scorecard includes a mixture of quantitative and qualitative measures, including how participants perceive the quality of the relationship. These KPIs are jointly shared and regularly reviewed, reflecting on the fact that this is a two-way collaborative business relationship, and that strong performance from both parties is necessary for it to be successful.

eXceeding is a fully independent supply chain and procurement consultancy business that prides itself on being able to give impartial, expert advice and support to all customers. Our team utilises decades of experience to ensure that you are not restricted by your incumbent or potential providers’ accreditations, capabilities, knowledge or flexibility. And certainly not only offered with solutions that make them the most money!  Our expertise will help your business obtain the best services, products and solutions from the correct provider(s) at the most competitive prices, on your terms - not just theirs!

Our skills, capabilities, competences and knowledge have helped many companies gain significant procurement savings for many years. So why not contact eXceeding today to arrange a free consultation.

For further information on Supply Chain Management plesae visit our Supply Chain page

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