Supplier Relationship Management (SRM) forms a key part of the procurement cycle. It could be argued that a contract should merely be agreed upon and the rest will take care of itself. In reality, this is rarely the case. A contract simply states what should be done. Supplier relationship management is about making it happen.
For many authors and academics, the sole factor in supplier relationship management is communication. Although effective communication is integral to commercial relationships, it forms only part of the overall approach to supplier relationship management. There are a number of other rules to consider when examining the relationship from a buyer / supplier viewpoint.
- Communication. This is key to successful commercial relationships. The point being that it must be effective communication. Expressing your thought clearly and precisely using the most appropriate channel of communication is a good start combined with good listening skills. For the communication to be effective the message must be understood and clearly signalled as such. How the message is transmitted, received and interference to the message would all need to be taken into account as described in the Shannon-Weaver communications model. Further considerations from the viewpoint of supplier relationship management would be the time, place and frequency of communication.
- Respect. You will succeed more in a relationship where you respect the other party and they respect you. Suppliers want to work with buyers who demonstrate integrity and appreciate them for the value-add they provide to the buying organisation. Respect helps to build trust and with that trust comes endless possibilities to increase performance through innovation and problem solving. This can only be possible where both parties understand their contribution to the agreement and trust one another.
- Openness. To gain respect is important that both parties are open with each other. Sharing information including results and problems shows a willingness to work together to achieve the objectives of the agreement. Not only should the communication be open, it should also be honest. If there is a problem it should be stated. If the problem is on the buyers side they must admit to it and find a solution. The same would be expected of the supplier.
- Fairness. Building trust through respect and openness reaps benefits. However, this can be countermanded where one or both parties are not satisfied with the relationship. If the supplier feels that they are not being treated fairly they may be unhappy with the relationship and not perform to the requirements of the agreement. If the buyer feels that they are being treated unfairly they may resent having the agreement with the supplier and look to source elsewhere. This is not to say that either party should roll over for every requirement of the other. Fair means being treated reasonably based on the requirements of the contract and relationship.
- Terms. Specific to supplier relationship management is the fact that the relationship is based around a contractual agreement. We have already identified that the contract states what should be done. This also forms the basis for how the relationship will be monitored. The contractual terms will state what each party has agreed to do. This may include prices, delivery and quantities. During the lifetime of the contract, the buyer will monitor these responsibilities to ensure the agreed performance is maintained. Regular communication with mutual respect, openness and fairness will ensure effective communication keeps the agreement on track. Thus merging contract management with supplier relationship management.
If you are interested in how to develop your supplier relationship management skills and how they can be used to manage and develop supplier performance, why not study for a CIPS Diploma in Procurement and Supply. For more information about this qualification or the range of procurement courses from The Oxford College of Procurement and Supply, call one of our course advisors today on +44 (0)1865 515255 or email firstname.lastname@example.org.