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CHAPTER 5
SUPPLIER RELATIONSHIP MANAGEMENT
• Provides formal routes of engagement at different levels of management,
allowing further supplier business opportunities to be exploited at senior
levels.
• Provides forums for discussing and resolving supplier issues, including
escalation paths within both organisations, thereby preventing unnecessary
conflict with buyers. SRM ensures that both partners communicate at high
levels.
• Creates room for limiting the influence of the buyer on the manner in which
the supplier runs its operation.
• Helps ensure that supplier capacity is matched efficiently with demand by
sharing information pertaining to market trends and dynamics.
A number of valuable benefits accrue to the buyer. For the buyer, SRM:
• Streamlines supplier management processes, which leads to reduced internal
costs.
• Enhances the ability to focus spend on ‘strategic’ suppliers, which results in
further leverage and efficiency.
• Helps improve the development of supplier capabilities and the acceleration
of value delivery.
• Supports better supplier accountability for business results.
• Reduces supply costs by between 5% and 15% by improving transportation
and logistics, order processing, and storage, to name a few areas.
• Improves implementation against delivery schedules and quality standards
by giving the buyer the opportunity to effectively negotiate the scheduling of
supplies as well as the expected quality of the supplies.
• Improves joint objective setting, planning and collaboration with suppliers.
5.3.2 GOALS OF SRM
The exchanges that exist between buyers and suppliers involve not just the
procurement and supply of goods and services but a relationship that demands
an honest partnership. Contemporary organisations have discovered that the
way to gain the most value from their business partners is by enhancing their
collaboration throughout their supplier base. This realisation has caused the
concept of SRM to gain popularity among organisations of all kinds. In broad
terms, the following are some of the major goals of SRM:
• To streamline and make more effective the processes shared between an
enterprise and its suppliers. In this sense, SRM is analogous to Customer
Relationship Management (CRM) in marketing and Employee Relationship
Management (ERM) in human resources management.
• To enable an enterprise to improve its communication with its different
suppliers; to share methodologies, business terms and information with them;
and to improve familiarity with each other so as to optimise the supply process.
• To ensure that suppliers familiarise themselves better with the core business of
the enterprise and its different products so as to ensure a customised supply.