What is Supplier Relationship Management?

Supplier Relationship Management is a critical aspect of IT that uses processes and systems to manage and optimize supplier relationships.

Definition of Supplier Relationship Management (SRM)

Supplier relationship management is a strategic approach to managing relationships with the organization’s suppliers. It emphasizes building long-term beneficial collaborations that drive mutual growth, value monitoring, analyzing supplier performance, identifying areas for improvement, and developing strategies to optimize the relationship.

It involves various repetitive data-heavy tasks, like contacting suppliers, updating data, and parsing this information for actionable insights. 

Here, IT managers are leveraging Robotic Process Automation (RPA) for data entry and scheduling to free IT managers for other instrumental tasks.

SRM and its Importance in IT Operations

Supplier relationship management is a broad term in the context of IT operations. It incorporates the acquisition of IT hardware assets like computers, laptops, servers, hubs, peripherals, and other devices, as well as software components like cloud, upskilling software, anti-viruses, and department-dedicated solutions with their licenses, renewals, upscaling/downscaling, and integration details.

Carrying our SRM appropriately leads to efficiently handling various IT data—like inventory tools. 

Automation platforms help standardize and systematize every acquisition and SRM process, greatly simplifying and speeding up daily tasks.

Key Components of SRM

The critical components of Supplier Relationship Management are:

• Governance: A long-term process involves strategic policies, processes, and procedures needed to manage supplier relationships. SRM is an intrinsic part of vendor management in supply chain management. The prime objective behind SRM governance is to create a set of rules and regulations that each stakeholder can follow for clear and effective communication.

• Supplier Performance: Supplier performance management (SPM) in SRM ensures that the suppliers comply with all the clauses drawn in a contract. It also examines product quality and gauges whether additional elements, such as meeting deadlines, following rules, being dependable, stable, adaptable, etc., are adhered to.

• Information Sharing: Information sharing, or SIS (supplier information system), is a pivotal part of SRM. It shares information/data with suppliers, including quotations, purchase orders, delivery status, invoices, and customer complaints. However, SIS struggles with trust and confidentiality.

• Risk Management: To minimize risks, a firm using SRM needs to assess which element of the supplier relationship can affect it and the severity of these risks and put a hold on activities that could accelerate these risks.

Benefits of Effective SRM

SRM is widely adopted in the current IT landscape. Here are a few benefits of adopting it:

Enhance Supplier Performance and Cooperation: Well-defined SRM rules can enhance supply performance by setting clear communication channels and measuring performance parameters like lead time, customer feedback, and quality of supplies delivered. With a global delivery model, robust cooperation between buyers and suppliers can reduce costs and time.

Achieve more Favorable Pricing and Terms: Good relationships between buyer and supplier can lead to many benefits, like:

• Dealing with multiple vendors can escalate costs and time, so a well-defined SRM lowers overheads and leads to faster and more efficient performance

• Apt SRM can bring quick customizations that may not be possible otherwise

• Items like computers, laptops, hubs, servers, workstations, and more can be shipped globally without a fret from IT buyers

• Sending orders directly to warehouses, remote offices, or employees worldwide to keep enough stock for future hires

Increase Efficiency Through Optimized Processes: A well-drafted SRM can lead to:

• Coordination among shipping, customs clearance, and timely delivery of IT assets globally

• Ensuring the items comply with local and global guidelines

• Tailoring each item to meet its desired output

• Balancing the cost of procuring, shipping, and installing IT assets

SRM and its Role in IT

Adopting SRM in IT leads to procuring custom technology, software licensing and compliance, risk management, performance monitoring, strategic sourcing, and vendor collaboration.

Role of SRM in IT Department

Since most of the equipment used within an organization is sourced by the IT department, it is instrumental the process is optimized to a T. IT assets like hardware, software, and IT services are seen by the IT department as procuring, sourcing, and negotiating skills needed to comprehend major frameworks like ITIL. A well-defined SRM leads to increased visibility of day-to-day operations, ensuring that production and delivery are on par with competitors’ positioning and combating supplier’s inefficiencies, if any.

Challenges IT Managers Face in Supplier Management

With sub-par supplier relationship management, there come a plethora of setbacks:

• Tracking the positioning of raw materials is difficult

• In HR processes, communication with various suppliers becomes daunting

• Incapable global deliveries

• Not enough visibility of on-boarding and off-boarding assets

• Security concerns leading to breaches of confidential information and details like ISO numbers, invoice details, bank details, and global equipment hubs

FAQs

What is an example of Supplier Relationship Management?

Company ABC uses SRM software, data analytics, and an e-procurement system to monitor risks and continuously improve to build optimal supplier relationships, reduce supply chain disruptions, and enhance business performance.

What is the first step in Supplier Relationship Management?

The first step is to segment the supply base. Suppliers can be grouped by the goods they supply, quantity, quality, location, and price.

What are the 5 critical points of SRM?

Five pivotal elements are supplier segmentation, strategy, implementation, monitoring, and collaboration.