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.
Do you have an effective Supplier Relationship Management program?
Not sure where to start when implementing a formal relationship program? Focus on these 4 pieces to get started.
- 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.
Identification of 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.
- 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. 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.
- 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.
At Waypost Advisors, we offer resources with expertise and experience that can help you implement and refine your SRM process.