There’s a common misconception regarding procurement and supplier relationship management: the primary value of building a good rapport with suppliers is to reduce costs. While lower costs can be a benefit of improved relationships with suppliers, it’s also not the whole picture.
Suppliers are external strategic partners that can collaborate with businesses to achieve mutually beneficial results and help businesses innovate and solve problems. By prioritizing supplier relationships and implementing software solutions that bridge process and communication gaps, and equip teams with the tools to evaluate vendor performance, perform audits, identify issues, and choose the best suppliers.
What is the supplier relationship process?
The supplier relationship process involves a series of steps and strategies used to manage and build relationships with suppliers. The goal of this process is to maximize value for the supply chain and improve profitability for the business.
While this may vary depending on the business and its needs, the SRM process is typically made up of the following steps:
- Segmentation and classification of the supply base. Segmenting and classifying suppliers based on the quality of their product/service, profitability, and risk exposure help determine whether suppliers are an ideal partner or a potential risk to a business. The goal here is to forecast value delivery.
- Strategy development. This step aligns and informs the buyer-supplier relationship, outlines key elements like business needs, expectations, and compliance and governance, and establishes supplier performance KPIs.
- Strategy execution. Collaboration between buyers and suppliers is essential to the strategy execution. The two parties will work together to create a roadmap for sourcing activities that will go toward meeting business goals.
- Evaluation and measurement. Buyers will measure how well suppliers met their needs, and determine whether they are a good candidate for a long-term collaboration or a potential risk to the business based on the KPIs established during the strategy development phase. Based on the supplier’s performance, the procurement team can negotiate better prices or contract terms or improve the quality of products — or, if supplier performance is not up to par, terminate the supplier.
- Feedback. With a formal feedback step in the SRM process, communication between suppliers and buyers can be improved and is an opportunity to collaborate in a mutually beneficial manner so the supplier can be a better partner and the buyer can be a better customer.
Throughout the process, collaboration and communication is at the forefront and are the key to maximizing supplier relationship value and overall supplier quality.
What is supplier relationship management software?
Supplier relationship management (SRM) software is a procurement solution used to support and enhance relationships between companies, procurement teams, and suppliers.
Supplier relationship management software provides additional insight and visibility into day-to-day communications and interactions with vendors. It can also help procurement managers:
- Evaluate suppliers based on performance, which provides leverage in negotiations and helps teams determine when to consider new or additional vendors.
- Make data-driven decisions that align with overall business objectives.
- Establish mutually beneficial relationships.
- Optimize the purchasing process by discovering hidden value.
- Improve supplier segmentation, supplier strategy development, and supplier strategy execution.
Benefits of SRM for procurement
Markets and business environments change quickly, and digital transformation is underway in every corner of the business world. That’s why it’s critical for businesses to redefine the benefits of supplier relationships so as to outperform the competition and meet new supply chain demands and choose a software solution that helps them reach business objectives and unlock hidden value provided by this silent strategic partner.
In addition to assessing risk and avoiding extra incurred costs, SRM software centralizes data from various sources, maintains and updates supplier information, and solves common challenges that can affect procurement teams, including:
- Aligning stakeholders — like business leaders and suppliers — on mutually beneficial changes or improvements to existing processes or supplier relationship management initiatives.
- Mitigating risk by ensuring suppliers are compliant and following internal policies.
- Process improvements and supplier innovation that lead to cost optimization and top-line growth.
How Pipefy unlocks hidden value
With Pipefy, procurement teams can turn SRM strategies into action. Pipefy’s visual user interface makes it easy to focus on the big-picture value of supplier relationship management, not just the costs.
Pipefy centralizes supplier-related information and data flow automatically from various systems into a single source of information. Here are some ways Pipefy acts as a visibility and communication layer that standardizes and connects disparate systems and activities to help improve supplier relationship management:
|SRM Challenge||Pipefy Solution|
|– Lack of visibility into supplier performance or meaningful supplier KPIs|
– Identifying areas of improvement
|Customizable dashboards and reporting capabilities let teams set supplier KPIs and track their performance, as well as spot improvements, monitor supplier spend, or innovation opportunities.|
|– Disjointed supplier information||Pipefy helps teams get more from their existing systems and apps without adding complexity. |
Easily integrate with common procurement software — such as ERPs (SAP, NetSuite, J.D. Edwards), e-sourcing (Ariba, Coupa), sign systems (DocuSign)
— for a more seamless and accurate flow of information.
|– Managing approved supplier databases or list||Store and access important information in a single, centralized database. Streamline supplier management by importing Excel spreadsheets or external software — and easily export information as well. |
Pipefy’s database features also allow you to automate tasks like updating multiple records.
|– Communicating with suppliers||Automate communication with suppliers with trigger alerts or automated e-mails to foster a culture of collaboration and strengthen cross-functional engagement.|
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5 tips for building better supplier relationships
Improving your relationships with suppliers can bring a range of benefits to your company, including building a more effective procurement process. Here are some ways you can build rapport with your vendors:
1. Partner with the right suppliers
This will vary based on needs or business objectives, but the foundation to developing strategic supplier relationships is finding suppliers that create and retain significant value, and are open to developing joint objectives.
2. Lay the foundation for a supplier relationship management program
An SRM program is only as effective as its framework. Like any new project that needs stakeholder buy-in, an SRM program requires a defined scope, joint targets, and a roadmap for how value creation will be measured.
3. Track meaningful KPIs
Evaluating supplier performance can help procurement teams identify ways to improve existing supplier relationships or decide whether it’s time to forge new partnerships. It’s also an opportunity to take a strategic partner role with suppliers and start building mutually beneficial solutions.
4. Foster a culture of communication
Communicating with suppliers openly, frequently, and transparently is the fuel for successful long-term partnerships that ignites collaboration at every level of supplier management.
5. Leverage the benefits of supplier relationship management software
With a procurement solution that streamlines supplier relationship management, businesses can become more efficient, resilient, and competitive.
Don’t settle for less from your suppliers
Supplier relationships that have gone sour can negatively impact business objectives and lead to financial waste, like administrative and quality costs. But with an SRM software solution, you can get ahead of potential risks and keep track of supplier spend, gather the insights you need to support supplier negotiations, and speed up the procurement processing time.
With the resources you need to build an efficient SRM program, your procurement team can unlock hidden value that leads to big, long-tail business savings.