Introduction to Supplier

Relationship Management (SRM)

Instructor: Dr. Hassan Younis

Supplier-Customer Relationships Management
Lecture 4
 SRM
Different definitions (1 of 6)
“SRM is essentially the process for organizations determining the
supply categories that are important and creating the strategies
that manage these items in an intelligent way.”

“Supplier relationship management (SRM), in simplest terms,

refers to interacting with and managing third-party vendors that
provide goods, materials, and services to your organization.”

“SRM enables procurement to operate at a strategic level and by

adopting a more collaborative approach and developing a closer
relationship; this generates more value from the relationship in
terms of innovation and efficiency.”
 SRM
Different definitions (2 of 6)
The steps in SRM are essentially
threefold:
1. Supplier segmentation.
Map suppliers against
profitability and risk
exposure.
E.g. The Kraljic Matrix
2. Supplier strategy development.
Distribute internal resources
and plans to meet business
needs.
3. Supplier strategy execution.
E.g. Key performance
indicators
 SRM
Different definitions (3 of 6)
Is SRM equivalent to collaborating with key strategic partners?

SRM is not equivalent to collaborating with key strategic partners.

However, a genuine SRM process must encompass both:

• Stationery companies. Supplier segmentation process will

indicate that this category in question is not important and
therefore significant resources should not be placed in
managing suppliers that service these goods. E.g. e-auctions.

• Strategic partners. They demand much care and attention from

the purchasing organization. Plans must be shared, long into
the future between both parties. E.g. sensitive commercial
information.
 SRM
Different definitions (4 of 6)

The art in the execution of strategic supplier relationships is to

look for opportunities to:

• Innovate, either within product development or in process

improvement and to move away from the relentless cost-
cutting drives that obsesses the procurement community;
• To reduce the complexity of managing tens of thousands of
suppliers;
• To create more collaborative relationships that yield greater
productive value;
• To create trust and long-term mutual goals.
 SRM
Different definitions (5 of 6)

Simple ways to improve the strategic supplier relations are:

1. Consider their view of you

E.g. The supplier possess overlapping interests with the
buying company.

2. Communication style
E.g. Communication with the suppliers on the basis of an
equal partnership.
 SRM
Different definitions (5 of 6)

3. Bring in the business

E.g. Involve them directly in managing the partnership by
inviting relevant personnel into supplier meetings to discuss
performance, opportunities and the future.

4. Foster the right behaviors and understanding strategic

customers.

5. Get the most out of strategic suppliers

Intense bilateral relationships requiring time and trust. As such,
the requisite buyer investment into the relationships should be
reciprocated with a diverse array of supplier benefits.
 SRM
Different definitions (6 of 6)
• SRM can create enormous value for businesses: it doesn’t
simply provide another negotiating weapon to use against
suppliers rather, it demands that buyers fundamentally shift their
mindsets to understand the possibility of alternative partnership
dynamics.

• SRM is a demanding process that needs investment and few

organizations are adept at deploying it. As with any change of
view, the move to true supplier relationship management, can be
difficult to make.

• Unless buyers manage these relationships in a methodical

fashion, such investments may be wasted.
How can I keep my suppliers
motivated?
Our changing
world

1.1 The changing

landscape
 SRM & Our changing world (1 of 2)
• The role of the supply base and the way
organizations are engaging with suppliers is
changing.
• Resources are getting scarce.
• Our planet has more densely populated
regions meaning more interaction.
• The world continues to become smaller with a
global marketplace. However, the nations that
supply the world are changing.
• China now equals the United States in terms
of manufacturing output
• India is pushing Japan aside to become one of
the biggest purchasing nations on the planet
 SRM & Our changing
world (2 of 2)
• Banking institutions are suddenly more
accountable and transparency is a
prerequisite for success.

• Suppliers have more access to the

market and can operate from anywhere
on the planet.

• The world is no longer a collection of

different groups but a giant network
connected in real time.
60s and 70s
• Supply chains were a fairly
linear collection of individual
entities each operating
independently.

• The entire chain covered a

series of separate needs,
interactions and relationships;
collectively forming a chain.
Nowadays
• This traditional approach is no longer
adequate to manage risk or gain competitive
advantage.

• Today being a retailer alone is not enough

(retailers are also becoming transport
companies and farming consultant).

• Now vertical integration is once again an

attractive proposition. EMAL/EGA (world’s
largest premium aluminum producer)
Examples of Change

• Tata Group started as a steel company and now has over 100
companies including: automotive, chemical companies, consulting
businesses, hotels, tea, transportation and service companies.

• How the 2013 horsemeat scandal allowed Morrisons to publically

demonstrate the confidence it had in its supply chains.
• Panadol story with its rival in Australia
Social Responsibility (1
of 2)

• Consumers now expect companies to

be socially responsible and some even
manage to factor this into their buying
decisions.
• Sustainable, fair trade, responsible,
ethical can no longer be a unique
differentiator that attracts premium
pricing, but a basic feature for
everything a company does.
 Social Responsibility
(2 of 2)

• The person who picks the coffee beans is

as much part of the product.
• It seems customers and consumers are
also now paying more attention to stories of
how household names operate.
• Investigation increased the attention on the
entire supply chain.
 Social Responsibility

• ISO 26000 is the international standard

developed to help organizations
effectively assess and address those
social responsibilities that are relevant
and significant to their mission and
vision; operations and processes;
customers, employees, communities,
and other stakeholders; and
environmental impact.