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CHAPTER 5
SUPPLIER RELATIONSHIP MANAGEMENT
submit their proposals or bids. For the actual selection, the team may decide
to use negotiation or competitive bidding, or combine the two.
5.3 SUPPLIER RELATIONSHIP MANAGEMENT (SRM)
There is no universally accepted definition of SRM. It is a set of methodologies
and practices needed for interacting with suppliers of products and services of
varied criticality to the profitability of the enterprise [1]. It is also an advanced
supply chain management means of building closer relationships with selected
strategic suppliers, the purpose being to discover the added features that could
enhance the relationship while improving business performance as the firms
work in a network environment for mutual benefit, increasing the likelihood of
creating profitable new revenues together [2].
SRM is the discipline of strategically planning for and managing all interactions
with third-party organisations that supply goods and/or services to an organisation
to maximise the value of those interactions [3]. Others will argue that SRM is
a comprehensive approach to managing an enterprise’s interactions with the
organisations that supply the goods and services it uses [4].
A common thread found in these points is that SRM is about developing a
harmonious and reciprocal relationship between buyers and suppliers. The
term therefore refers to the practice and processes for interacting with suppliers.
Modern organisations understand how critical their business partners can be
to the success of their operations. By working together synergistically, buyers
and suppliers can substantially improve their business processes, while sharing
information to reduce wasted time and resources to improve overall margins.
5.3.1 SRM BENEFITS
Adoption and implementation of effective SRM yields an assortment of benefits
to stakeholders. The overall benefits can be uniquely high, to the extent even of
eclipsing those derived from strategic sourcing. For the purposes of the current
discussion, the scope of the benefits will be limited to those benefits that accrue
to the supplier and to the buyer.
For the supplier, SRM:
• Facilitates the development of a reciprocal long-term relationship with the
buying organisations, thereby ensuring a win-win situation between the
parties.
• Creates opportunities for joint investments between supplier and buying
organisation.
• Provides opportunity, the creation of goodwill, and a good public reputation.
• Provides sufficient insight into the buying organisation’s business needs,
which enables the supplier to meet those needs and ensure that the buyer’s
obligations to the supplier are identified and managed.