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What comprises a Supplier Relationship Management (SRM) function?

Supplier Relationship Management should be an holistic approach to the operation and development of customer-supplier relationships.  

SRM is holistic where it covers all functional areas, in particular how these are bridged between the two organisations, and where interactions at different levels of management are defined.

Relationship management components:

  • Services Agreement: The contract terms and/or SLA defining 'what' has to be supplied.
  • Culture and Principles: Basis for the way the relationship will be conducted.
  • Management Arrangements: Organisation, roles, responsibilities, escalation routes, meeting forums.
  • Processes: Service management aligned processes
  • People: All those involved in the relationship, from both parties, and at each level of seniority. 

Discussion

At a strategic level (where appropriate) supplier relationship management is predominantly concerned with strategic alignment between the organisations, the future development of the relationship etc.  From the customer's perspective this will increase the chances of new products and services being delivered sooner, aiding their competitive position.  From the supplier's perspective it helps to increase commitment, reduce new product/service investment risk and inform the strategic plan.

At a contract level, these components ensure that the commercial performance of the contract meets expectations, that benefits are being realised, and reviews likely future performance.  A review against changes to the business environment will also consider the need for benchmarking and possible price reviews.   For a customer this ensures that deals remain competitive.  For a supplier it provides an opportunity to demonstrate its performance against the industry and to review opportunities for extending business.

At the operational level the components are expanded to the greatest level of detail to ensure that all points of interface are defined, for processes ranging from billing, risk management,  incident management and escalation, change management through to communications and training.  A relationship management function from the customer's perspective should be an assurance function ensuring that products and services are delivered to agreed standards.  The customer will want to seek assurance of best practice from the supplier to reduce the risk of future problems, as well as measure existing performance.  From the supplier's perspective the function helps to ensure that performance management is focused at a 'what' rather than 'how' level, to ensure that the supplier is given the room to design and implement their own service delivery processes.

 

 

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