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What is Supplier Relationship Management?

Supplier Relationship Management (SRM) is both a process and a discipline in procurement. As a process, it involves managing supplier relationships through specific activities and steps. As a discipline, it includes strategic principles and best practices.

Defining Supplier Relationship Management (SRM)

Supplier Relationship Management (SRM) is a strategic approach to managing an organisation's interactions with its suppliers to maximise the value of these relationships. It involves classifying suppliers based on their importance, monitoring and improving their performance, identifying and mitigating supply chain risks, fostering collaboration and innovation, and ensuring transparent communication.

By effectively managing supplier relationships, companies can achieve spend reductions, mitigate risk, improve product quality, enhance operational efficiency, and drive mutual growth and innovation.

SRM involves more than just procurement; it is about creating and maintaining productive, long-term supplier relationships. This encompasses several key components:

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Canopy SRM fosters long-term, collaborative supply chain partnerships. It enhances mutual benefits, drives innovation, and ensures a reliable supply chain by empowering you to evaluate performance, negotiate better contracts, and develop joint initiatives, optimising costs, quality, and delivery.

Key attributes of SRM

​These are the key attributes of an effective SRM strategy:

  1. Supplier identification and segmentation: Vendor Master Records are crucial for supplier identification and segmentation. Accessing comprehensive information about a supplier, including contracts, is essential for effective supplier management. These records facilitate contact and allow you to visualise suppliers based on their importance and impact on the business, helping to prioritise resources and efforts towards those who are most critical to the company’s success.

  2. Sharing information: Sharing data throughout a business is a key aspect of SRM, as it ensures all departments are aligned and informed about supplier performance, risks, and opportunities, leading to better decision-making and collaboration.

  3. Supplier onboarding:  The process of efficiently integrating a new supplier into a company's supply chain by collecting necessary information, ensuring compliance with standards, and establishing communication and operational procedures.

  4. ESG Reporting: SRM facilitates ESG reporting by providing comprehensive data and insights on suppliers' environmental, social, and governance practices, enabling businesses to ensure compliance and transparency in their sustainability initiatives.

  5. Performance management: Monitoring and measuring supplier performance to meet the required standards involves key performance indicators (KPIs) such as delivery times, quality of goods, and compliance with contractual terms.

  6. Risk management: Identifying and mitigating risks associated with the supply chain includes financial instability, geopolitical issues, insurance, and logistical challenges.

  7. Collaboration and innovation: Working closely with suppliers to drive mutual growth and innovation leads to the development of new products, improved processes, and enhanced services.

  8. Communication and transparency: Ensuring transparent, open, and honest communication with suppliers helps build trust and resolve issues swiftly.

Implementing SRM offers numerous benefits:

  • Spend reduction: Companies can achieve significant spend reductions by optimising supplier performance and negotiating better terms.

  • Improved quality: Regular performance reviews and collaborative improvement efforts can produce higher-quality products and services.

  • Enhanced efficiency: Streamlined processes and better supplier coordination can reduce lead times and improve operational efficiency.

  • Risk mitigation: Proactively managing risks ensures a more resilient supply chain, reducing the likelihood of disruptions.

  • Innovation and growth: Strong supplier relationships can foster innovation, leading to new product development and business growth.

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