{"id":3437,"date":"2022-08-22T06:00:00","date_gmt":"2022-08-22T06:00:00","guid":{"rendered":"https:\/\/www.shipbob.com\/au\/blog\/supplier-relationship-management\/"},"modified":"2025-08-17T09:08:43","modified_gmt":"2025-08-17T09:08:43","slug":"supplier-relationship-management","status":"publish","type":"blog","link":"https:\/\/www.shipbob.com\/au\/blog\/supplier-relationship-management\/","title":{"rendered":"Benefits of Supplier Relationship Management [+How to Improve SRM System]"},"content":{"rendered":"\n

Table of Contents<\/p>

** Minutes<\/p><\/div><\/div>\n

What is supplier relationship management (SRM)?<\/a><\/p>\n\n\n\n

Benefits of improving supplier relations<\/a><\/p>\n\n\n\n

Reactive vs. strategic approach to SRM<\/a><\/p>\n\n\n\n

3 key steps in the supplier relationship management process<\/a><\/p>\n\n\n\n

How to improve your supplier relations<\/a><\/p>\n\n\n\n

Add a 3PL to your professional circle<\/a><\/p>\n\n\n\n

Supplier relationship management (SRM) FAQs<\/a><\/p>\n<\/div>\n\n\n\n

Most businesses cannot be 100% in control of their supply chain. <\/p>\n\n\n\n

This is because the majority of businesses rely on suppliers to help them procure<\/a>, move, and ultimately sell their products. From wholesalers who supply raw materials inventory<\/a> to the electricity companies that supply the power needed for your production process, third parties play a critical role in your ecommerce supply chain.<\/p>\n\n\n\n

For some sellers, the idea of depending on outside suppliers for inventory or services can be daunting. But with the right supplier relationship management strategy, you can build partnerships that add value to both your business and your supplier\u2019s, and ultimately create a more optimised supply chain<\/a>. <\/p>\n\n\n\n

In this article, we\u2019ll cover what supplier relationship management is, key steps in the supplier relationship management process, tips for improving supplier relations, and more.  <\/p>\n\n\n\n

What is supplier relationship management (SRM)?<\/h2>\n\n\n\n

Supplier relationship management (or SRM) is the process of managing your relationships with third-party vendors or suppliers. <\/p>\n\n\n\n

It involves systematically evaluating vendors based on their assets and capabilities to determine what value they add to your overall business strategy, as well as planning how to increase that value by strengthening those relationships.  <\/p>\n\n\n\n

Benefits of improving supplier relations<\/h2>\n\n\n\n

Improving supplier relationships isn\u2019t just about improving rapport \u2014 rather, there are real monetary and strategic benefits to be gained from proactively managing your supplier relationships.<\/p>\n\n\n\n

Find and keep the right suppliers<\/h3>\n\n\n\n

Suppliers play a central role in driving revenue for your business, and therefore have a significant impact on your business\u2019s success. By taking the time to attend to each supplier relationship, you\u2019ll gain new insights into which suppliers are helping you succeed and which are hindering you. <\/p>\n\n\n\n

From there, you can act accordingly, strengthening your relationships with key suppliers and cutting ties with ineffective ones to create a better supply chain.  <\/p>\n\n\n\n

Optimise value chain and promote innovation<\/h3>\n\n\n\n

Simply by assessing and attending to supplier relationships, you may identify new opportunities or areas of improvement in your supply chain. Through leveraging key relationships, you could work on new innovations together, and deliver greater value for everyone involved. <\/p>\n\n\n\n

Reduce costs<\/h3>\n\n\n\n

At its core, supply chain management<\/a> boils down to a single goal: producing relationships that are more efficient and mutually beneficial, and that therefore deliver cost-savings. <\/p>\n\n\n\n

A streamlined supplier network is a cost-effective one, so managing supplier relationships well can lower your overall supply chain costs.  <\/p>\n\n\n\n

Supplier relationship management also involves practices such as collaborative supply chain analysis and joint demand management, which help you pinpoint cost-saving opportunities while opening discussions on removing costs from certain areas of the supply chain.<\/p>\n\n\n\n

Reactive vs. strategic approach to SRM<\/h2>\n\n\n\n

Traditionally, there have been two approaches to supplier relationship management: reactive and strategic. <\/p>\n\n\n\n

Reactive supplier relationship management involves managing supplier relationships only when there is a disruption or an unfavorable situation. This approach aims to solve problems only after they arise, and only focuses on improving the performance of unreliable suppliers.<\/p>\n\n\n\n

Strategic supplier relationship management, on the other hand, aims to prevent supplier problems or disruptions before they occur. Through systematically evaluating suppliers and developing a strategy to manage relationships, a business takes proactive steps to mitigate risks while strengthening their supplier relations.<\/p>\n\n\n\n

A strategic approach to supplier management is almost always preferable, as it is much easier to avoid supply chain issues in the first place than fix them. The strategic approach increases your supply chain\u2019s resilience<\/a>, while also establishing more positive, constructive supplier communication and rapport (which is difficult to do when you only speak to your supplier when things go wrong). <\/p>\n\n\n\n

3 key steps in the supplier relationship management process<\/h2>\n\n\n\n

There are three main steps in the supplier relationship management process.<\/p>\n\n\n\n

Supplier segmentation<\/h3>\n\n\n\n

The first step involves segmenting your vendors according to different categories. While the exact categories may vary for each business, the classification typically segments suppliers by factors such as item, the complexity of the product or service, price, and supply volume. <\/p>\n\n\n\n

The goal of segmentation is to figure out which suppliers provide the most strategic value to your overall operations, and which pose the most risk for your business. To assess this value, create a supplier scorecard that accurately reflects the contribution of each supplier toward your business success. <\/p>\n\n\n\n

What brings value to one company may not bring value to another. However, some common value-adds in suppliers include:<\/p>\n\n\n\n