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3 Key Areas to Manage for Successful Supplier Relationship Management

April 3, 2017
Posted by adjuno

supplier relationship management

In the same way that managing relationships with your customers is crucial to ensuring repeat sales, supplier relationship management(SRM) is essential to keeping the supply chain running smoothly. In fact, SRM may be more important in enabling you to deliver on your customers’ expectations and for the most part it can be about managing risk effectively.

So what are the 3key areas you need to control – and how can an SRM solution help?

1. Financial stability and business continuity

Customers expect your business to deliver on its promises every single time. Especially where there are contracts in place.

One of the fundamental principles of supplier relationship management will be choosing partners who can demonstrate a track record of financial stability. If a supplier goes bust, you cannot deliver outstanding orders.

The same is true if a natural disaster or similar takes a supplier’s operations offline. Without a robust business continuity plan in place, an outage for them could be a disaster for you. Every supplier you consider will almost certainly have a business continuity plan in place – but does it align with your own strategy and goals?

You can use a SRM solution to record and assess the financial and operational health of your suppliers. Capturing this information allows you to assess which potential suppliers are aligned with your own strategy and which ones will make suitable partners moving forward.

Also, by having visibility of this information against all your suppliers by product line or service, you can also quickly identify back-up suppliers in the event that a primary, or tier 1 provider cannot fulfill their obligations to you.

2. Compliance with legal, quality and value standards

Your products and services are bound by various standards – from legal obligations, to customer expectations. If you cannot uphold these standards, your business could be prosecuted – or simply fail to sell any goods or provide a service.

Robust in-house Quality Assurance (QA) processes are of paramount importance. For example, they need to ensure products leaving your warehouses meet the QA standards set out by your industry. But, there may also be opportunities to improve the overall quality of your products and cut costs by having a transparent and visible set of standards that are shared across your entire business before individual components arrive on your production line. Or, if you work in the financial services industry, this could simply be sharing your code of conduct and principles of compliance for suppliers to agree to before entering into a partnership.

To make this process simpler, supplier relationship management solutions can be used to record details of supplier compliance and ensure that those who do not meet baseline standards are excluded. Proving compliance at every stage of the supply chain throughout your supplier ecosystem will help protect your business against risk and make information gathering and reporting easy in the event of an audit or legal investigation.

You should be able to build a supplier “scorecard” that assesses compliance with the key regulatory and quality metrics for your industry or business, ensuring you have the right suppliers in place at all times. Where problems do arise, you have the evidence required to request improvements – or even terminate agreements.

3. Traceability of products and services

The ability to trace individual, specific product components – like food ingredients, or the raw materials that are used to manufacture items from a tin of paint to a child’s toy – is absolutely vital to meeting legal obligations. Having visibility of what makes up your products and services and where they are sourced from ensures that the quality is upheld, and that your business reputation and your customers are safeguarded from the associated damage of bad business practice.

Effective management and traceability of your supplier network and processes should never be restricted to first or even second tier suppliers. You also need to demonstrate that processes such as manufacturing, logistics or even managing agents in the case of claims handling and fulfillment, comply with local laws, beyond your own facilities, to those of all your suppliers.

Having an easily accessible SRM solution for all of the stakeholders involved in your supply chain is important. You can make business easier by providing a platform that suppliers can access in order to directly record the proof your organisation needs. And, you can use the same platform to verify that standards continue to be upheld throughout your end-to-end supply chain process.

In today’s connected world, it’s growing in importance to be able to demonstrate the provenance of your products and services in order to prevent risk. Moreover, doing so can even help with your marketing by building credibility and trust with your end customers.

 

 

 

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