Supply Chain Consulting Tips To Improving Supplier Relationship Management

In today’s rapidly changing landscape with increasing uncertainty and volatility, the effective management of relationships with your suppliers is more important than ever. Positive, mutually beneficial partnerships will ensure that your company is investing money, time, and energy with those suppliers that enable your success and provide a competitive advantage.

Do you have an effective Supply Chain Management program?

Not sure where to start when implementing a formal relationship program? Focus on these 4 pieces to get started. Many businesses turn to supply chain consulting firms to help implement and optimize their supplier relationship management programs.

Understanding Supply Chain Management

Supply chain management is the process of planning, coordinating, and executing the flow of goods, services, and related information from raw materials to end customers. It involves managing the entire supply chain, from procurement to delivery, to ensure that products are delivered to customers on time, in the right quantity, and at the right cost. Effective supply chain management is critical for businesses to remain competitive in today’s global marketplace.

Key activities in supply chain management include:

Procurement: Sourcing and purchasing raw materials and goods.
Production: Manufacturing and assembling products.
Logistics: Transporting and storing goods.
Inventory Management: Managing stock levels and inventory turnover.
Distribution: Delivering products to customers.

By optimizing these activities, businesses can improve operational efficiency, reduce costs, and enhance customer satisfaction. Effective supply chain management ensures that every link in the chain is working harmoniously, leading to a more resilient and efficient supply chain.

The Importance of Supplier Relationship Management

Supplier relationship management (SRM) is a critical component of supply chain management. It involves building and maintaining strong relationships with suppliers to ensure that they can deliver high-quality goods and services on time and at the right cost. Effective SRM can help businesses to:

Improve supply chain resilience.
Reduce costs and improve profitability.
Enhance product quality and innovation.
Improve customer satisfaction.

To achieve effective SRM, businesses should focus on building trust and collaboration with their suppliers, communicating clearly and regularly, and providing feedback and support to help suppliers improve their performance. By fostering strong supplier relationships, companies can create a more resilient supply chain that can adapt to changes and disruptions more effectively.

Ranking Suppliers

Not all suppliers OR supplier categories are equal. As a company, you need to determine where to focus the bulk of your supplier relationship management efforts. Your top-ranked suppliers will be those that supply items / services that are critical to the success of your business. Often this is reflected in the spend total, but not always. The A-ranked suppliers will have the most robust elements of SRM while your lower ranks will receive a scaled back version. Supply chain companies often use sophisticated ranking systems to ensure that their most critical suppliers receive the attention and resources needed to maintain high performance levels.

Identification of Supply Chain Key Performance Indicators

What elements of the goods or services you purchase from this supplier matter the most to you? This will vary by industry and spend category. For some categories it might be on-time delivery. For others it may be focused on product quality and consistency. You will have different KPIs for a goods supplier than a services supplier. The same priorities you use when selecting a supplier will help determine what the KPIs should be. Logistics companies, for example, may be evaluated on KPIs such as on-time delivery and transportation efficiency.

Tracking Metrics for Operational Efficiency

For those that have robust data systems that can easily measure and report on performance, lucky you! For the rest of us, the gathering of metrics can be time-consuming and difficult. Investing in digital capabilities can significantly enhance the accuracy and efficiency of tracking these metrics. Many times, it makes more sense to ask the supplier to report out on the KPIs to you so the burden of measuring and gathering data is part of the goods / services they provide. This will become the scorecard you use to track your supplier’s performance.

For a goods supplier, example metrics could be average lead time and order accuracy.

For a services supplier, example metrics could be average wait time for customer service support or percentage of first contact resolution.

Leveraging Technology

Technology plays a critical role in supply chain management, enabling businesses to optimize their supply chain operations, improve efficiency, and reduce costs. Some of the key technologies used in supply chain management include:

Artificial Intelligence (AI): AI can be used to analyze data, predict demand, and optimize supply chain operations.
Digital Tools: Tools such as blockchain, IoT, and cloud computing can improve supply chain visibility, transparency, and security.
Digital Technologies: Technologies like robotics, automation, and machine learning can enhance supply chain efficiency and productivity.

By leveraging these technologies, businesses can improve their supply chain capabilities, reduce costs, and enhance customer satisfaction. Embracing digital tools and technologies allows companies to stay ahead of the competition and create a more agile and responsive supply chain.

Consistency Wins through Continuous Improvement

Once you and your supplier have agreed upon the KPIs and scorecard, make sure you are meeting with your supplier regularly to review performance. Most often this is quarterly, but supplier category and performance will dictate the cadence.

Regular reviews also provide an opportunity to discuss and implement strategies for sustainable supply chains, ensuring long-term resilience and environmental responsibility.

At Waypost Advisors, we offer resources with expertise and experience that can help you implement and refine your SRM process.

Overcoming Common Challenges

Supply chain management is a complex and challenging process, and businesses often face a range of common challenges, including:

Supply Chain Disruptions: Disruptions can occur due to natural disasters, supplier insolvency, and logistics failures.
Inventory Management: Managing inventory levels and turnover can be challenging, especially in fast-paced markets.
Sustainability: There is increasing pressure to ensure that supply chains are sustainable and environmentally friendly.

To overcome these challenges, businesses should focus on building resilient supply chains, improving inventory management, and adopting sustainable practices. This can involve investing in digital technologies, building strong relationships with suppliers, and adopting continuous improvement methodologies. By addressing these challenges proactively, companies can create a more robust and sustainable supply chain.