Supplier Relationship Management

Supplier relationship management (SRM) is the end-to-end process of managing a supplier through the entire sourcing life cycle, which includes first identifying the abilities of a particular company with regard to performing a service for the internal customer, completing a sourcing event, negotiating a contract, executing an order, and determining payment. This involves all aspects of the relationship including:

• Day-to-day transactions

• Identification and mitigation of operational risk and deliverables

• Business continuity planning

• Understanding the suppliers’ business challenges

• Identification of opportunities to improve value and reduce cost

• Establishing scorecard metrics for improvement and reviewing progress towards these objectives

• Contract T’s and C’s

• Leveraging the flow of information between key internal process owners and the supplier to create value

When problems are identified, this may drive a supplier development initiative, which is a hands-on six sigma approach to support suppliers to achieve quality delivery and cost targets. Supplier development occurs when there is an existing supplier who is performing at a certain level that has deficiencies—and working to fill the gaps in performance—or when the supplier relationship is not generating the savings projected. This is a critical component for minority suppliers (covered in a later chapter).