Lauren writes about inventory for Sortly. Her favorite thing to organize? Her comically large collection of stuffed animals.Lauren
You’ve probably heard the business term “SRM,” but what does SRM stand for, exactly? It stands for supplier relationship management. And chances are, SRM could help your business operate more productively and profitably.
Just about every business is a part of our global supply chain—a network of manufacturers, transporters, warehouses, and distributors to buy and sell products. And since your company likely relies on other partners to remain functional and profitable, optimizing relationships with your key suppliers couldn’t be more essential.
This article will define supplier relationship management (SRM), covering all the information you need to know. We’ll also review all the benefits of good SRM, including a more profitable, reliable, and stable business model.
Supplier relationship management, also known as SRM, is a big-picture strategy businesses implement to ensure their relationships with suppliers are as optimized, coordinated, and profitable as possible.
In SRM, a company identifies the most critical suppliers in their network and then determines how to manage relationships with those vendors. And since supply chains are complex, most companies establish measurable, crystal-clear methods to evaluate each supplier.
The simplest way to practice SRM is to make a list of all the suppliers in your company’s network. Then, decide what criteria you’d like to use to evaluate your suppliers. Some examples of performance indicators? Communication, reliability, accuracy, affordability, and flexibility. You can also include figures like lead time and minimum order quantity.
Once you’ve written your list of suppliers and determined what criteria matter to your business, you can create a scorecard for all your suppliers. To accurately score each supplier, you’ll probably want to consult with different members of your team, from top executives and accountants to the employees who place orders and work in shipping and receiving.
You’ll also want to reevaluate your suppliers regularly so you can stay on top of any changes in communication, value, or reliability.
And, most importantly, remember that your SRM isn’t just an evaluation—it’s a hands-on process. If something isn’t working with a supplier, you should let them know and work together to improve your processes.
Related: How to Choose a Supplier
Companies practice SRM in hopes of increasing their profitability—and reducing headaches, too. Here are a few notable benefits of supplier relationship management:
No company wants to overpay their suppliers—but there’s more to profitability than simply paying less for goods. Changing suppliers over and over again can also cost your business a pretty penny. That’s one reason why good SRM can keep your costs down.
When you practice top-notch supplier relationship management, you’ll know ahead of time what suppliers are ready to grow with your business as you scale or forecast higher demand. And, most importantly, you’ll uncover what suppliers aren’t a match for your business before they slow your operations down.
SRM can also help you move away from suppliers whose prices are constantly fluctuating, or at least help you negotiate a lower minimum order quantity.
Next up, you can expect good SRM to weed out unreliable suppliers. That’s because over time, your supplier relationship management will help you evaluate all your vendors, offering you the chance to identify and solve any problems with reliability, quality, and more.
For example, if a supplier is constantly underestimating lead time, your businesses could work together to either speed things up or agree upon a new, more realistic lead time. If you can’t fix what’s broken, you may need to replace that supplier with a more reliable one.
By practicing supplier relationship management, you’ll constantly optimize your roster of vendors. Month by month and year by year, your team of suppliers will become more reliable, offer more value, and become easier and easier to communicate with.=
And to most businesses, that increased confidence in vendors is worth quite a bit—especially when the global supply chain is vulnerable.
Sortly is top-rated inventory management software designed to help your business stay on top of all its stuff. From supplies and materials to high-value assets, Sortly can help you understand how much you’ve got, where it is, and when it’s time to reorder more.
What’s more, Sortly is ultra-customizable—your business can add all the details that matter most to your team, hassle-free. For example, many Sortly users track what supplier sells each item in their inventory. That way, it’s easy to create reports about what you get from each supplier. And that can make analyzing your supplier relationship even simpler.
Ready to get your inventory organized today? Try Sortly absolutely free for two weeks!