Here Are 5 Impactful Ways to Improve Supplier Relationship Management in 2024

If the past few years have taught us anything, it’s that supplier relationships are the lifeblood of resilient, thriving supply chains. Yet time after time, supply chain leaders say their relationships with partners are stuck in reactive transactional mode and lack strategic collaboration.

So how can you cultivate supplier partnerships that can stand strong in the face of disruptions? This comprehensive guide examines 5 powerful ways you can start optimizing your organization‘s supplier relationship management (SRM) in 2024.

Implement even a few of these tactics, and you’ll be well on your way toward supply chain success. Let’s dive in.

1. Make Supplier Qualification and Onboarding More Rigorous

If you don’t take the time to properly vet potential partners upfront and clearly set expectations from the start, don’t be surprised when the relationship falters down the road. Studies show that robust qualification and onboarding processes can reduce third party risk by up to 50%.

So where should you focus when bringing on new suppliers? Here are some best practices:

Verify financial health and stability

Request 2 to 3 years of financial statements and keep an eye on metrics like profitability, liquidity, leverage ratios, and trends over time. This gives you a snapshot of suppliers’ financial standing. Monitor any changes on an ongoing basis so you aren’t blindsided by issues.

Thoroughly evaluate production capabilities

Don’t just take a supplier’s word about capacity – verify via site visits. Make sure they have adequate facilities, technology, workforce skills, and scalability to actually meet your current and future demands.

Prioritize strict quality control

High standards around quality ultimately protect your customers and brand reputation. Require compliance with quality certifications and conduct regular audits of suppliers’ QA processes. Address any deficiencies immediately.

Screen sustainability practices

Given 73% of customers want sustainable offerings, review energy use, emissions, waste, water usage, and social metrics. Collaborate on target areas for improvement.

Mandate business continuity plans

Unfortunately, disruptions are inevitable so require robust contingency protocols for scenarios like natural disasters, cyber attacks, raw material shortages, and more. Test these periodically.

Align on guidelines upfront

Leave no question about your processes, delivery expectations, documentation, quality criteria, sustainability goals, contingency protocols, and communication preferences.

Following thorough qualification and onboarding sets the stage for a transparent, resilient partnership over the long haul.

2. Evolve Supplier Interactions into Strategic Partnerships

Moving beyond transactional interactions to build strategic win-win partnerships promotes supply chain agility and innovation. But it requires a fundamental mindset shift on both sides.

How can you spearhead this transformation?

Engage suppliers early in product design

Imagine tapping into suppliers’ expertise right from the initial concept phase. Their experience can unlock game-changing perspectives on materials, design enhancements, or manufacturing approaches you may overlook internally.

Increase data transparency

The lifeblood of seamless planning is real-time data sharing. Implement APIs for slick integration of demand forecasts, inventory levels, production schedules, and shipments.

Do collaborative forecasting

Bring suppliers to the table when projecting future demand and capacity needs. They may spot trends or planning gaps you miss. Joint forecasting also gives them greater visibility into upcoming requirements.

Offer incentives for shared goals

Consider gainsharing, risk sharing, or pay-for-performance structures that reward suppliers for collaborating to achieve mutually beneficial KPIs like quality, responsiveness, sustainability, and end-customer satisfaction.

Invest in helping suppliers improve

Sometimes the best way to strengthen the partnership is lending your own expertise. Provide training, technology, or even R&D support to help suppliers enhance processes, upskill workers, achieve ESG goals, and reduce costs.

With the right foundation of trust and shared vision, a transactional supplier can transform into an indispensable business partner.

3. Look into Supplier Relationship Management Software

Juggling multiple suppliers while relying on manual processes like email and spreadsheets is a recipe for miscommunications and delays. Supplier relationship management (SRM) software delivers game-changing benefits:

Central supplier database – A master repository consolidates supplier information in one place – categories, products, locations, certificates, contacts, financials, and more.

Procurement automation – Built-in workflows handle tendering, purchase orders, approvals, receipts, invoicing, payments and more.

Supplier portal – Suppliers manage their own profiles, interact on orders, check inventory levels, submit questions, and access reporting.

Risk management – Advanced systems continually monitor supplier financials, capacity, regulatory compliance, sustainability, and cybersecurity, flagging any alerts.

Performance analytics – Real-time interactive dashboards withSupplier KPIs and scorecards provide visibility into how partners are executing.

Leading solutions include SAP Ariba, Ivalua, and Coupa. 77% of businesses say SRM software delivers higher supplier performance and lower risk.

4. Perform Regular Audits and Business Reviews

Trust but verify, as the saying goes. Periodic on-site audits and business reviews are a must to ensure suppliers meet expectations long after onboarding.

Conduct on-site audits

Routinely observe processes in action via facility tours. Verify supplier practices align with contractual quality, working conditions, sustainability initiatives, security protocols, and regulatory compliance.

Do quarterly business reviews

Discuss performance against KPIs, risk mitigation strategies, ideas for improvement, feedback, and relationship health. Document action plans and follow-ups. Frequent touchpoints identify any pain points to address promptly.

According to KPMG, 78% of procurement leaders say consistent supplier evaluation through reviews and audits is crucial for value delivery. Don’t lose sight of how suppliers are executing day-to-day.

5. Have Contingency Plans Ready for Supplier Disruptions

Given the range of potential supply chain disruptions – from cyber attacks to raw material shortages – contingency protocols are a must to mitigate fallout for your customers.

  • Bankruptcy – Qualify alternate sources and watch supplier financial metrics.
  • Cyber attack – Require cybersecurity audits and resilience plans.
  • Labor strike – Identify temporary alternate suppliers as needed.
  • Natural disaster – Diversify geographically to avoid concentration.
  • Material shortage – Develop additional supply sources for critical items.
  • Factory outage – Mandate business continuity plans from suppliers.
  • Geopolitical event – Assess trade, tariff and sanction risks regularly.

While you hope to never need contingencies, scenarios tests verify plans are workable. Resilient supply chains emerge with preparation.

With supply chains only growing more complex and vulnerable, SRM should be priority number one. Companies that implement more rigorous onboarding, transform transactional suppliers into strategic partners, leverage SRM technology, audit consistently, and prepare contingency plans will gain significant competitive edge.

The strategies in this guide provide a roadmap to start strengthening your supplier relationships today. Just remember – optimizing SRM is an ongoing journey, not a one and done project. With the right focus and commitment to continuous improvement, you have the power to build supply chain resilience that can weather any storm on the horizon.

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