Supplier relationship management (SRM) is a partnership approach between a company and its key suppliers, building a mutually beneficial relationship through personalized service and communication. It involves formal business tools, personal contact, and mutual respect to maximize profits and grow businesses.
Supplier relationship management (SRM) is basically a partnership approach between a company and its key suppliers. It works on similar principles to a company’s executive account management services for its major clients. Instead of one company simply buying products from another, a mutually beneficial relationship is built and maintained between the companies.
Aspects of this business relationship often include many formal business tools such as requests for proposals (RFPs) and price negotiations. Vendors provide customized services to their SRM partner customers, such as extensive product and sourcing knowledge. Buyers in supplier relationship management partnerships communicate with suppliers about the products they need so ordering agreements can be worked out for them. They don’t just place orders, but typically speak with an account executive who handles only the most important customer accounts.
In most industries, a key account manager is assigned the company’s most profitable client accounts. In many cases, this person will also be assigned the most valuable supplier and distributor accounts to monitor. This action is a common component of supplier relationship management. Suppliers in relationship management partnerships with their customers often order necessary supplies. For example, an office furniture company with an electronics store as a major customer would likely purchase the new computers it needs from this company with which it is building a working relationship.
Buyers and suppliers involved in this beneficial working relationship will generally not limit their contact to phone calls or emails, but will have representatives visit in person at least occasionally. Personal contact can increase the perceived value of the relationship, but it can also increase profit, as it often results in more sales. Because vendor relationship management is about creating and maintaining that business connection, most people want to meet with an account executive in person. Typically, the account executive’s manager and the business owner also meet face-to-face with the vendor, at least from time to time.
As SRM participants work on building mutually beneficial relationships, the attitude between the two participants is generally one of mutual respect and appreciation. Attentive, personalized service and special gifts are some of the “perks” of this type of buyer-supplier relationship. Supplier relationship management requires communicating, planning, implementing, maintaining, and fulfilling commitments. Supplier relationship management helps each partner maximize profits and grow each other’s businesses through loyalty, respect and the best possible service.
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