Best Practices for Supplier Relationship Management

𝐑𝐞𝐟𝐥𝐞𝐜𝐭𝐢𝐧𝐠 𝐨𝐧 𝐚𝐥𝐥 𝐭𝐡𝐞 𝐬𝐮𝐩𝐩𝐥𝐢𝐞𝐫𝐬 𝐈’𝐯𝐞 𝐬𝐨𝐮𝐫𝐜𝐞𝐝, 𝐨𝐧𝐞 𝐭𝐡𝐢𝐧𝐠 𝐢𝐬 𝐜𝐥𝐞𝐚𝐫: 𝐩𝐫𝐨𝐜𝐞𝐬𝐬 𝐦𝐚𝐭𝐭𝐞𝐫𝐬. Taking shortcuts can lead to wasted money and a world of headaches downstream. (𝘙𝘢𝘪𝘴𝘦 𝘺𝘰𝘶𝘳 𝘩𝘢𝘯𝘥 𝘪𝘧 𝘺𝘰𝘶'𝘷𝘦 𝘦𝘷𝘦𝘳 𝘣𝘦𝘦𝘯 𝘢𝘴𝘬𝘦𝘥 𝘵𝘰 𝘧𝘢𝘴𝘵-𝘵𝘳𝘢𝘤𝘬 𝘙𝘍𝘗 𝘳𝘦𝘲𝘶𝘪𝘳𝘦𝘮𝘦𝘯𝘵𝘴, 𝘰𝘳 𝘩𝘢𝘥 𝘭𝘦𝘢𝘥𝘦𝘳𝘴 𝘱𝘶𝘴𝘩 𝘧𝘰𝘳 𝘤𝘦𝘳𝘵𝘢𝘪𝘯 𝘴𝘶𝘱𝘱𝘭𝘪𝘦𝘳𝘴, 𝘪𝘨𝘯𝘰𝘳𝘪𝘯𝘨 𝘮𝘢𝘵𝘦𝘳𝘪𝘢𝘭 𝘳𝘪𝘴𝘬𝘴?!) 𝐖𝐡𝐚𝐭 𝐈'𝐯𝐞 𝐥𝐞𝐚𝐫𝐧𝐞𝐝: 💡 𝙁𝙤𝙘𝙪𝙨 𝙛𝙞𝙧𝙨𝙩: Be specific about your needs in RFx docs. If you’re unclear, suppliers will be, too. Before going to RFP, always have quantifiable evaluation criteria finalized and approved by the Spend Owner. 💡 𝙄𝙩’𝙨 𝙣𝙤𝙩 𝙟𝙪𝙨𝙩 𝙥𝙧𝙞𝙘𝙚: The cheapest option often costs the most in the long run. Prioritize value over price. Suppliers who price things materially lower than benchmark norms usually cut corners somewhere to meet margins. 💡 𝘾𝙝𝙚𝙘𝙠 𝙧𝙚𝙛𝙚𝙧𝙚𝙣𝙘𝙚𝙨 𝙩𝙝𝙤𝙧𝙤𝙪𝙜𝙝𝙡𝙮: Source independent references via your network. Past performance tells the real story. Ask the right questions and listen closely to the answers.  💡 𝙏𝙝𝙞𝙣𝙠 𝙖𝙝𝙚𝙖𝙙: Can the supplier grow and evolve with your business? Are they innovative and flexible? Does their company culture and ways of working align with yours?  💡 𝙆𝙣𝙤𝙬 𝙩𝙝𝙚 𝙧𝙞𝙨𝙠𝙨: Most suppliers come with some level of risk, the key is understanding and managing it. Conduct due diligence on short-listed suppliers. Outputs should inform the down-selection process, with material deficiency action items included in the contract. 💡 𝘾𝙝𝙤𝙤𝙨𝙚 𝙥𝙖𝙧𝙩𝙣𝙚𝙧𝙨, 𝙣𝙤𝙩 𝙫𝙚𝙣𝙙𝙤𝙧𝙨: The best suppliers care about your long-term success and aligning with your goals.  Look at proposals holistically, thinking beyond the transaction and into value creation. 𝐇𝐞𝐫𝐞’𝐬 𝐭𝐡𝐞 𝐭𝐡𝐢𝐧𝐠: Looking back, I’ve been at firms in seasons where costs were prioritized over total value, often leading to short-term gains but long-term challenges. There were times I should’ve taken a firmer stance about material supplier risks identified and bias in the selection process.  As procurement peeps, we provide recommendations based on long-term value, risk management, and partnership potential. This includes having the courage to speak up with informed and actionable guidance when things don't pass muster. The goal is to ensure sourcing outcomes build a foundation for success, not just a quick win. 📢 𝙋.𝙎. 𝙒𝙝𝙖𝙩 “𝙨𝙘𝙝𝙤𝙤𝙡 𝙤𝙛 𝙝𝙖𝙧𝙙 𝙠𝙣𝙤𝙘𝙠𝙨” 𝙨𝙤𝙪𝙧𝙘𝙞𝙣𝙜 𝙡𝙚𝙨𝙨𝙤𝙣𝙨 𝙬𝙤𝙪𝙡𝙙 𝙮𝙤𝙪 𝙨𝙝𝙖𝙧𝙚 𝙬𝙞𝙩𝙝 𝙮𝙤𝙪𝙧 𝙮𝙤𝙪𝙣𝙜𝙚𝙧 𝙥𝙧𝙤𝙘𝙪𝙧𝙚𝙢𝙚𝙣𝙩 𝙨𝙚𝙡𝙛?

Strategic supplier relationships are the foundation of any procurement team. Here are the top 5 rules to get it right: #1 - Define your objectives before you enter a supplier relationship. Define your desired outcome - be it cost reduction, innovation, quality improvement etc. This is critical to guide your Supplier Relationship Management (SRM) SRM strategy. #2 - Segment your suppliers. Not all suppliers contribute the same. Categorize your suppliers based on criticality, complexity and value so you can allocate your resources more effectively and tailor your approach to different supplier types. #3 - Don't neglect performance measurement assessment. Regularly measure agreed-upon metrics so you can identify areas for improvement and proactively address issues. Schedule regular meetings, performance reviews and feedback sessions to guide this along. #4 - Implement supplier risk assessment. Identify potential risks such as quality issues, external disruptions, regulatory compliance. Work WITH your suppliers to mitigate these issues. #5 - Many overlook this, but treat suppliers as a vital component of the business plan and as team members. You are partners in the supply chain. Share the vision, sell the relationship’s value, and gain buy-in. Cost efficiency is critical but avoid treating your suppliers purely like transactional entities and acknowledge the total value offered. Hammering your suppliers until they break = no bueno. What have I missed?! 🤔

Suppliers can make or break a Procurement team. And yet, supplier relationship management (SRM) remains an underutilized tool for many teams because of lack of time, resources, or know-how. 💡What is an SRM framework? A set of structured strategies and processes intended to enhance supplier performance and build relationships that can deliver a competitive edge. 💡 How do you use it? 1️⃣ Segment suppliers so the right SRM approach can be administered to each supplier. Make use of Kraljic matrix, preferencing, etc. I managed Spices commodity - a market with many suppliers and many customers. The category was largely transactional with the exception of some high profitability SKUs. 2️⃣ Measure supplier performance with defined KPIs and assess regularly to provide actionable feedback. It requires regular upkeep. A client of mine faced supplier performance issues repeatedly across several locations. There were no agreed upon metrics so there was no reliable way to track performance and deliver improvements. A scorecard solved the problem, even if it took months to roll out. 3️⃣ Build relationships through specific strategies based on segmentation. Set up recurring update calls. They are a great way to stay abreast of supplier performance, stakeholder feedback, new business needs, and changing market conditions. I had a bottleneck category with a development supplier. mutual win was to leverage the supplier’s innovation capability while de-risking supplies. So, our meetings would cover supply market risk + NPD discussions. 4️⃣ Assess and mitigate risk Identify risks associated with each supplier, be it financial, supply disruption, sustainability, etc. Risk can be rolled into the performance score card as well. Mitigation plans can include alternate supplier development, or build in contingency plans. 5️⃣ Manage relevant aspects through contracts Usually a part of category strategy development, but deserves special mention when obligations must be contractually defined (for ex., strategic alliances, performance improvement plans, etc.) 6️⃣ Ensure alignment with Procurement and Business goals The ultimate goal of any SRM program is to further overall business objectives. During the COVID years, cost became a second priority to supply assurance across many categories. Many of us tinkered with our strategies to rebalance priorities. Supplier communications became far more frequent to better understand market conditions, waivers were given on key KPIs like On Time In Full, etc. 💡Why do I like it? It is a simple framework which is heavier in execution.. as it rightly should be, given that it takes time to build relationships. 💡What are the pitfalls of this approach? While the approach itself is solid, organizations face challenges due to poor data management coupled with a lack of integrated digital solutions that can seamlessly weave in SRM with day-to-day Procure-to-Pay activities including contract management.