4 Steps to Effective Supplier Relationship Management

Supplier relationship management (SRM) consists of managing and planning constructive interactions with the third-party vendors that supply your business with goods and materials. This is an important part of both supply chain management (SCM) and effective small business management.

When you communicate effectively with your suppliers, the entire supply chain process, including managing inventory and acquiring goods, will run smoother and be more efficient. Although buying SRM software is a good place to start, there are four other steps you can take to build relationships and partnerships with your suppliers to measure and increase performance.

1. Invest in supplier relationship management software

When shopping for SCM software, look for a program that has SRM features or apps, or consider buying a separate SRM program. This type of software contains invaluable features and performs tasks for you, such as providing all your suppliers' updated profiles, managing and monitoring supplier performance, and identifying and accommodating new suppliers. The more vendors you acquire, the harder it is to keep track of all of them, which is why software makes it easier by containing all of your supplier information in one centralized location.

2. Demonstrate to your suppliers that you're a good customer

Remember that both you and the supplier have a business to run, so just as you are measuring their performance, they will also be measuring yours. There are two important steps you can take to prove you're a good customer and earn respect from your suppliers. The first is to always pay your bills on time: Figure out what the payment terms are as soon as you place the order, and then abide by those rules. If for any reason you can't make the payment, let the supplier know as soon as possible when they can expect payment. The second step you can take is to give your vendors as much lead time as possible, and being honest in your projections.

3. Consider reducing your number of vendors

According to an Entrepreneur article, having too many vendors can be overwhelming, inefficient, and lead to higher administrative costs. Having closer relationships with a few choice vendors allows for both parties to work together to control costs, and eliminating "troublesome vendors can quickly increase the efficiency of your purchasing and administrative staffs." If you feel as though you have too many vendors but aren't sure which ones to eliminate, start by evaluating the performance of each. Take into account factors such as unreliability and lateness of delivery, higher costs, and insularity or unwillingness to communicate. Your SRM and SCM software can also help you evaluate supplier performance and make your decision.

4. Keep lines of communication open

This simple and most basic rule is also perhaps the most important. Invite your suppliers to your strategy meetings, let them tour your office, include them in business events and parties, and share information about new products and personnel. Likewise, you should be able to visit your suppliers' offices and know the ins and outs of their business. Personalizing the relationship like this and getting to know one another creates a solid partnership. It's also important to be honest and upfront with your suppliers about your needs so they can perform better and know what areas to improve in to keep you happy.

Effective supplier relationship management is the best way to ensure optimal supplier performance and help you run your small business more efficiently. Investing in high-quality software is a start, but actively taking the above steps will build even better relationships.

Micah Pratt
Written by
Micah Pratt
In her seven years working in digital marketing, Micah Pratt has worked with several start-up websites providing SEO, content strategy, and content marketing support. Currently in her role as the online marketing manager for Business.org, Micah focuses mainly on helping small business owners make financially smart business decisions.
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