Daily Archives: July 10, 2008

Getting Started with Supplier Relationship Management

We all know supplier management is important, especially the relationship aspect. We all know that if we don’t manage the relationship, then it could be hard to manage the performance and even harder to manage the risk. But what we don’t often know is where to start.

To that end, an article recently appeared on SIG‘s site that complemented an earlier series of posts on Robert Rudzki’s Transformation Leadership blog which, when taken together, give you a pretty good start.

In Supplier Relationship Management – How to Get Started with the Program, Pamela Schott noted that communicating and dealing with a large and diverse supplier community on a daily basis can be a challenge for any organization, and that, when implementing an SRM program, it is necessary to establish and gain executive buy-in on clear, concise objectives that align with the organization’s primary business goals.

She also noted that suppliers should be segmented according to risk and business impact, with the implication that high-risk and high business impact suppliers need to be carefully managed. A segmentation allows you to look at your supply base more pro-actively and identify opportunities to realign the management behaviors for suppliers based on the outcome.

In addition, you should scorecard your suppliers on a regular basis on key internal metrics, such as cost, delivery & support, administration & ease of doing business, quality & partnership, and technology. This will provide you with an understanding of high performing versus low performing suppliers and help you identify where additional effort needs to be extended.

In addition to managing your suppliers, you should also recognize them. As Robert Rudzki points out in The Role of Supplier Recognition, recognizing a supplier that does well often yields:

  • further performance improvements
  • improvements from suppliers who want to be recognized

… and this results in increased ROI across the board.

How should you recognize your suppliers? Robert Rudzki recommends an annual event where your “best of the best” suppliers are publicly acknowledged. Just be sure to note that, to pull this event off right, it will require leadership, effective program management, commitment from top management, a budget, and a long lead time. But considering the ROI potential, it could be worth it.