What is SRM

What is SRM

Like CRM (Customer Relationship Management), SRM or Supplier Relationship Management is also very important tool for any organization, to be used to analyze vendor behavior, supplied goods and service in more systematic angle of analysis.

Like CRM (Customer Relationship Management), SRM or Supplier Relationship Management is also very important tool for any organization, to be used to analyze vendor behavior, supplied goods and service in more systematic angle of analysis.

SRM (Supplier Relationship Management) and SCM (Supply Chain Management) both are almost same and has a very thin difference between them in their Material procurement cycle. Both are used to manage relationship between Organization and Suppliers for uninterrupted material supply. SCM apart from SRM also has CRM facilities too for managing finish goods supply in the market.

If an appropriate data of suppliers and supplied goods is maintained honestly, it will help in finding out supplier behavior and quality of goods and services supplied more precisely. This also helps boosting motivation of good suppliers and helps in taking corrective actions to those which can be used for future business.

The main focus of implementing SRM is to develop a mechanism to take care and boost the relationship between any organization and its vendors. If organization is able to achieve the said target is automatically able to enhance its quality, brand value and productivity and of course saving in cost factor too.

SRM is the win-win position for both Organizations and its suppliers. On one side organization is getting best quality with decreased costing and good suppliers will get a good business in the price war-based compaction.

Goal of SRM

  • In business everything revolves around trust and money. So as here too. Main goal of SRM is to make sure Vendors who are suppling material are not doing any unethical practice for getting the market share.
  • Product quality of the organization is not getting compromised just for saving few bugs.
  • Supply of material is adequate and timebound
  • Supplier is getting its dues in time and is satisfied with organization’s payment plan
  • Supplier is able in prioritizing the supply if required on urgent basis
  • How supplier is treating high demand material supply to organization
  • Supplier ratings analysis
  • Measuring how any supplier enhancing brand value of organization
  • Relationship and bonding with suppliers who are also playing the critical role as strategic partners in the product range.

Advantage of Implementing SRM

  • Organizations can plan for a strategic production growth
  • Organizations can have good insights about future price
  • Real time data will help in taking significant decisions to reduce manufacturing cost
  • A good supply chain and supplier relations will help in reducing inventory in stock means money saved in having dead inventory can be used in some other productive use.
  • As keeping no surplus inventory, risk on dead inventory piles is reduced

How Suppliers are Categorized in SRM

For organizations, though supplier is very important but not a primary constraint to think on. Primary factor is still the material and profit.

  • Suppliers are categorified based on the material category and are –
  • Material that plays the significant or critical role in production like Raw Material and Main spare suppliers are categorified as Class A category suppliers. Class A category material plays most important part in product costing and quality hence very tightly controlled for their quality, inventory and price band.
  • Material that plays important role but does not require very specific checks and control are classified as Class-B items so as the supplies supplying the material. Class B material also plays significant role in product quality and plant maintenance segment.
  • Material that is being used as an accessory and does not impact quality or quantity of product manufacturing falls in Class-C category. Suppliers, suppling such material also plays a nominal role in organization’s product costings.

How SRM helps Management

  • SRM managing strategies are crafted based on above classification for Suppliers. Some policies are kept common for all while some are totally based on Supplier classification.
  • Real time data helps Management in getting strategic decisions.
  • Management can very effectively observe the relationship graph of any supplier based on multiple input parameters like delivery, quality, price and availability factors.
  • Supplier history analysis will help management in understanding supplier performance
  • Strategic relationship with suppliers helps management in managing fund planning
  • Risk analysis management against dead inventory and fund blocking.
  • No loss of contact during leaving of some key executive, handling strategic procurement.
  • Based on ABC analysis of Inventory, management very effectively get to know which are the most important vendors for the organization. Now more emphasize can be given to these vendors.

How SRM helps Purchase Executives

  • Have real time data of Supplier contact information
  • Have complete detail of communication held with the supplier against particular Purchase Order.
  • Good relationship gives added advantage during odd hours like in present pandemic situation.
  • Market is volatile and good analysis and relationship helps in planning and managing strategic material in much advance.