So what exactly is Supplier Relationship Management, anyway?

A lot of terminology is being thrown in pubic forums, using terms such as collaboration, partnering, relationship management, and other themes.  These terms are, in my opinion, being over-used, without really attaching too much meaning to them.  They all seem to refer to some form of “touchy-feely”, kumbaya-type of relationship between buyers and sellers, that in the end doesn’t mean a whole lot or provide a lot of direction for specific actions to be taken.  In the last two weeks, I’ve had the opportunity to conduct a number of workshops on category management and contract negotiations, which has helped me to once again understand that actually managing relationships is one of the most important, yet most difficult things to achieve in organizations today.

To begin with, let’s try to map out what we mean when we talk about “Supplier Relationship Management”.  We can think about SRM (as its called by so many consultants today) as really comprising a number of different and distinct activities, that can be classified along the lines of PRODUCT-focused activities, or PROCESS-focused activities.  The first category has to do with improvements related to a specific product or line of business, while the second focuses on improving supplier’s process capabilities.

The second category of the framework includes identifying whether the focus or activity is specific to a particular supplier (SUPPLIER DEVELOPMENT), or is being applied across a broader base of suppliers (SUPPLY BASE MANAGEMENT).  The latter category may include a category management approach for a group of suppliers, or may apply across all suppliers the company uses.

As can be seen in the figure shown here, there are a huge number of different activities that fall into the general rubric of SRM!  These are sometimes affiliated with specific activities that occur within procurement, or may branch out and engage individuals in product engineering, product development, quality management, legal, regulatory, manufacturing/production, cost management, accounting, and even human resources!

So the next time you hear someone casually note that “Oh yeah, we’re doing SRM!”, pause and ask them which one of these 25 different activities they are referring to!

I am working on a project with KPMG’s Procurement Advisory Group on identifying best practices in supplier management, and will continue to keep readers of this blog posted as we learn more….