The Strategic, Tactical & Operational Value of Supplier Relationship Management (SRM).

Introduction

As business environments continue to evolve, Supplier Relationship Management (SRM) has become a cornerstone for effective procurement. Modern SRM systems offer more than mere supplier databases; they bolster performance, assist in risk management and can leverage the resources and capabilities of your supplier community to deliver strategic, tactical & operational benefits.

The diagram below shows a simple 3 step “Strategic Staircase” diagram outlining the increasing benefits of SRM maturity that companies in the Middle East can benefit from...

Step 1: Productivity Benefits

Leveraging SRM platforms can lead to remarkable productivity enhancements. Two significant benefits include supplier self-managed data and the creation of a single source of data.

A key advantage of SRM systems is their ability to allow suppliers to manage and update their own data. This shift speeds up supplier onboarding, evaluation, discovery and frees up time for procurement professionals to focus on more value adding activities. It also improves the timeliness and accuracy of supplier classification and master data and even increases competition if done well. 

Step 2: Performance & Risk Management

Next, we build upon the first step and see SRM's impact on enhancing supplier performance and managing, mitigating or eliminating risks and issues, suppliers can be segmented according to important variables/categories such as their risk impact on the business, their performance status, Kraljic classification etc. etc..

SRM technology enables the measurement and qualification of supplier performance through custom key performance indicators (KPIs), thus facilitating data-driven supplier evaluations. This transparency can foster performance improvements and inform strategic decisions on supplier continuity, development plan or exit.

Risk and issues management, a pivotal aspect of modern procurement, can also be significantly bolstered with SRM systems. Their risk evaluation tools and monitoring capabilities enable businesses to proactively identify, evaluate, and mitigate supply chain risks through preventative/corrective action plans and task management. This aids in solving problems before they occur and building resilience and agility into supply chains.

Step 3: Extend to Strategic Objectives

The final step in the strategic staircase involves extending further to tackle overarching strategic objectives. For example, SRM can be an effective tool for driving innovation and product/service development, promoting Environmental, Social & Governance (ESG) improvements, audit planning and improvements and enhancing quality, all areas that move beyond simple savings and can deliver sustainable competitive advantage.

SRM systems enable businesses to tap into the innovative potential of their suppliers. By fostering closer relationships and engaging suppliers in strategic discussions, businesses can leverage their supplier's expertise to drive product and service innovation.

SRM platforms can also play a significant role in the realisation of a company's ESG strategy. By incorporating ESG criteria into the supplier evaluation process, businesses can ensure alignment with sustainability goals and contribute to global sustainability efforts. Corrective action plans can also be used to increase the supplier communities capabilities in key areas important to your competitiveness.

Quality enhancement is another strategic objective that SRM can facilitate. SRM systems capabilities can also help improve product or service quality, leading to cost reduction and enhanced customer satisfaction.

Implementation Considerations

To deploy SRM technology most effectively, consider these key success factors:

• Define your objectives/priorities: Clearly outline what you aim to achieve with SRM – whether it's productivity enhancement, performance improvement, risk mitigation, or achieving strategic objectives.

• Data quality is important: Ensure you have robust processes to gather, cleanse, and maintain high-quality data. High-quality data in your SRM system will directly influence the insights and benefits it can deliver.

• Segmentation is key: Develop a different strategy for different types of supplier groups and focus your efforts & resources on the areas with the biggest impact first, review the segments and strategies over time to ensure ongoing relevance.

• Integrate with other systems: Harmonise your SRM with other business systems like Sourcing, Contract Lifecycle Management or P2P software (ideally utilise a native integration across modules from the same provider to reduce cost & risk). This integration unlocks synergies, enhances data quality, and improves overall procurement efficiency.

• Invest in training & communication: Ensure your workforce is well trained on the new SRM system and the supplier community understand the objectives and benefits of the implementation. This can smooth the transition process, avoid any fears and maximise the benefits of the system for all parties.

• Foster collaborative relationships with key suppliers: Use the insights from your SRM system to engage in open dialogue with suppliers, (SRM needs to be something you do together, with joint benefits, not something done ‘to them’). By involving suppliers in strategic discussions, you can leverage their expertise to drive innovation and add value for both parties. This can also lead to further relationship benefits such as 'Preferred Customer' status.
  

Conclusion

As we ascend in maturity up the 'staircase', it becomes clear that SRM technology and techniques play a transformative role in unlocking greater value the more they are adopted. Typically the business case is strong even if you stop at Step 1 (as the cycle time is typically reduced by 40% when compared to paper-based workflows), but the real impact comes as you advance to step 2 then 3, so starting with productivity enhancements, then adding performance and risk management improvements, and culminating in leveraging the same tools and techniques to take on more strategic objectives. SRM is an important tool in a company's procurement arsenal, properly implemented and pro-actively managed, SRM can unlock real value, support innovation and drive resilience, and ultimately help drive your business towards a increased economic growth and success.

Whether you're looking to streamline your procurement processes, achieve significant cost savings or improve supplier performance our proven procure-tech solutions can help. We would love to connect and discuss how our solutions can benefit your business - please hit the button below if you would like to talk about SRM or other procure-tech solutions...

Thank you,

Dan & the TechConnect:ME Team.

TLDR: Supplier Relationship Management (SRM) tools & techniques offer a high impact/low risk pathway for procurement value creation via a three-tier maturity approach:

1. Productivity Benefits: Free your teams from admin to value-adding tasks.

2. Performance & Risk Management: Improve performance at scale & manage risk proactively.

3. Strategic Objectives: e.g. foster innovation, drive ESG improvements & enhance quality. 

Successful SRM deployment hinges on: defining objectives, prioritising segments, data quality, integration with procurement systems, training & communications and nurturing collaborative supplier relationships.

About Dan

Dan is a co-founder at TechConnectME, he has over 20 years experience in the procurement and technology space, including leadership roles in some of the top tier technology providers. Dan has worked across the Middle East for 15+ years and is an MBA with further executive education in Digital Strategy (MIT), FinTech (Harvard), Leadership (Oxford) amongst others. You can catch Dan on his LinkedIn at: https://www.linkedin.com/in/dan-quinn-2604951 or his email: Dan.Quinn@techconnectme.com.