Living in a highly client-oriented time where businesses mostly focus on maintaining and improving client relationships, you shouldn’t look down upon the significance of good supplier relationship management. A healthy business model will essentially benefit from solid and long-term supplier relationships.
Procurement and supply relationships make up an important part of businesses and should be carried out with high-quality and correct approach. Things have become more complicated for modern manufacturers because they have to deal with a wide range of suppliers and complex supply chain systems. Not to mention that buyer-supplier networks are becoming more global and interdependent which increases the need for better SRM practices.
A well-thought and strategic supplier relationship management will enhance the effective communication between you and your suppliers also enabling supplier performance measurement, supplier quality management and increase in the company’s profitability.
While SRM processes can vary from business to business, we can still single out a few main tasks that supplier relationship management presupposes:
- Supplier segmentation, which enables the categorization of your suppliers based on the contribution they have to your business.
- Development of governance and performance management models that will align your business processes and assign stakeholders according to the goals of your company.
- Supplier relationship improvement, this means that in order to have better products or services, you’ll need to enhance the communication between you and your suppliers and share the needed strategic information with them.
You can take these processes and your SRM management to the next level with the help of high-quality SRM software. The latter combines different features and functionalities that will make supplier relationship management much easier and clearer for you and your team letting you focus on its more important parts.
What are the Benefits of SRM Software?
As a C level executive, you want to make sure that your procurement and supply management processes are fulfilled in the best way and bring the expected results. Regardless of the complexity of SRM management, you can still be a huge success if you implement the right SRM software combined with clever business strategies.
To help you understand the importance of SRM software for your supplier relationship management processes, we have made a list of the benefits that you will witness provided you choose the right SRM software solution:
- Improved Total Cost of Ownership (TCO)
The total cost of ownership of your business will be noticeably reduced with the help of the right SRM software. This software will enable you to manage your suppliers in a more orderly and thorough manner and make improvements if needed.
However, it’s not just about cutting prices, the focus should be more on building long-term supplier relationships which then naturally pave the path for the reduction of total costs. Keep in mind that TCO includes not only the product price but also the cost of poor supplier quality, poor delivery, etc.
SRM software will track and preserve all the data about the performance of your suppliers and share it with them as well. This way you and your suppliers will always be in tune with all the service procurement processes and make all the required changes or refinements.
- Improved Efficiency and Supplier Quality
Communication is the key that leads to the improvement of the quality of delivered products from your suppliers. As you get to have clear and better communication with your suppliers with the help of SRM software, you’ll begin noticing changes in their performance.
The main reason for this is the fact that constant communication and exchange of the required metrics help the supplier get a better idea about your business. As a result, they manage to meet your needs and requirements more effectively.
SRM software comes with high precision ensuring that your suppliers are aware of your quality standards and delivery timing. This reduces the possible delays and improves the quality of overall operations.
- Faster Problem-Solving Approach
Together with the improvement of consistency and coordination of supplier relationship management processes, all the further arising issues or problems will be solved faster and in a much more efficient way.
As things become automated, lots of outdated SRM practices give way to the new, more innovative solutions. SRM software comes to save not only your money but also the time which in business terms equals to money. A number of tasks that you and your team used to do manually, now don’t require human interaction letting you all focus on the other aspects of the supplier relationship.
- Compatibility with ERP Systems
SRM software works well with pretty much all existing ERP systems. Moreover, it helps them use and achieve their full potential. Via high-quality SRM software, you will be able to receive combined ERP supplier data and stakeholder feedback in one place. This releases you from having to deal with large numbers of separate suppliers as the software does most of the work for you.
- Working Capital Optimization
Your working capital is what ensures liquidity for your growing business. This said you should also know that supplier costs make up about 60% of revenue for the majority of wholesale and retail companies. Apparently, these points make working capital optimization a simple necessity for any business.
SRM software will reduce your total costs thus improving the product prices, operational costs and other relevant expenses which will surely have a considerable impact on your business’ bottom line and working capital.
Some other important benefits of SRM software include the following:
- Reduced Project Sourcing Cycle Time: Instead of going through many requests for proposal (RFP) and comparing a wide range of quotes, SRM software will let you merge all of this into a simplified selection process. Another good thing that helps decrease the project sourcing time is that you can save the projects and repost them later.
- Easier Selection of Suppliers: SRM software will let you compare different prices easily and quickly and also have a look at the past performance of vendors. E.g., if you get attracted to low prices, you can check the last performance of a given vendor and if the quality of the delivered products turns out to be high then you should go for it. But if the last shipment was unsuccessful, you might have to reconsider your choice.
- Procurement Intelligence: An example is the improved supplier risk management which implies a more detailed and precise identification, assessment and control of the threats over your company’s capital caused by the supply chain.
It’s worth mentioning at this point that every chief procurement officer in every business has the chance to essentially increase the company’s profitability. Good SRM can actually contribute to your company’s gross profit from about 30% to 70%. Thus, as a C level manager of your company, if you take the responsibility of implementing high-quality SRM software and correct strategies, your business will also start enjoying all the above-listed benefits and advantageous features of an automated solution.
Boost your relationships with your suppliers, improve their performance and decrease the product prices as well as the operational costs by investing a little in the highest standard SRM software. It surely will pay you back in features that will enhance your bottom line!