Supplier Relationship Management is used interchangeably with Contract Management. SRM focuses on people and relationships whilst contract management is checking the benefits realised from managing a contract after its awarded. Both of them involves a process of managing contracts during its lifetime to maximise the benefits and minimising poor performance and associated risks with a supplier that is performing badly.
Supplier Relationship Management is carried out post contract award but its worth noting that management of a contract can only be as good as what was included in the first place, therefore the tendering or upstream activity needs to be done correctly in the first place and a good procurement manager should take a cradle to grave approach.
There is a difference between SRM and Contract Management.
Supplier Relationship Management focuses on the following
- Cultivating the right relationship. People buy and sell to people they like and by having open and clear communications where a supplier is made to feel like a partner goes a long way to increasing productivity for both parties.
- Leverage the suppliers knowledge. As a procurement professional you are either the last to be invited to the table or you are looked upon as a highly regarded professional. Make sure you are the latter by fostering close relationship with suppliers to understand the latest thinking, options and the direction the industry is moving in. Become part of the group people identify as thought leaders rather than clueless. Make yourself invaluable by being helpful in identifying risk and resolving issues before they become a problem. If purchasing globally review your supply chain and work with suppliers to identify opportunities for continuous improvements.
- A good relationship is a win win, suppliers who feel valued will work with you and treat you as a business partner. Aim to improve supplier capability and when appropriate push them to re-engineer new solutions. Work towards better quality, reliability and opportunities for cost reduction. If appropriate use a gain share model.
- Track your progress and ensure its documented. Update senior management with dashboard reports and use data to support your work.
- Work with suppliers to raise their profile, whilst raising the profile of the procurement function at the same time.
Below is quick note on Contract management and why it’s different
Contract management focuses on the supplier relationship and how they are performing against the contract
- The procurement manger might check that the expected service benefits are achieved
- The supplier will attend regular contract management reviews to discuss performance
- Any escalation are managed with the account manager
More on Contract Management here [insert hyperlink]