Supplier management: everything you need to know about SRM

2 de October de 2023

Every company puts a lot of effort and resources into improving its performance and ensuring its competitiveness in the market. Part of these efforts has to do with supplier management, a vital alliance that requires special attention and care.

For this, Supplier Relationship Management (SRM) systems are a good support, as they represent the best way to optimise the company’s relationship with its partners.

The main objective of SRM is to improve the purchasing and supply management of the organisation. This is achieved through an action plan covering all aspects of supplier relations.

Phases and processes in supplier management

Good supplier management makes it possible to achieve the best quality at the best price for the products and services on which the company depends. This is possible by defining an appropriate strategy to select the suppliers that best suit the company’s needs.

In this sense, the SRM comprises the following phases to delimit the route to follow:

  1. Analysing the company’s current supplier base.
  2. Manage the direct relationship between supplier and company (contracts, orders, agreements, etc.).
  3. Define collection and dispatch agreements and conditions, guaranteeing maximum profitability for the business.
  4. Back up and update all data regarding supplier-company relations, so that it is available at any time.

In turn, within the SRM framework, a series of processes are implemented in order to design the appropriate strategy to optimise the commercial operation of the organisation. These include:

  • Ranking suppliers. This is achieved through a comparative analysis of the price-quality ratio offered by the local and international market. We will segment them.
  • Understand the suppliers’ offer. It is necessary to carry out a thorough analysis that identifies the characteristics of what each supplier offers. This is known as evaluation.
  • Guarantee the quality of the products purchased, as well as the fluidity of payments and deliveries. Here, it is essential to maintain continuous monitoring of quality controls, as well as direct communications with suppliers. This is possible through proper planning.
  • Keep management informed of all transactions. All supporting data on supplier relations needs to be continuously updated so that management is aware of the company’s business performance.

Conditions for success in Supplier Relationship Management

To ensure successful supplier management, we advise you to consider a number of key factors:

  • Guarantee supplier-customer independence. This ensures a high level of trust that allows for smooth business relations.
  • Apply permanent quality control. This requires mutual cooperation between both parties.
  • Establish all necessary agreements under a legal contract. Quality, price, delivery dates, as well as dispatch, delivery and payment systems and procedures must be agreed in advance.
  • Both the supplier and the company should make sure to monitor all phases of their internal processes, maintaining fluid and friendly communication to ensure successful operations.

Supplier control plan as part of SRM

In the supplier control plan, both internal and external factors must be taken into account; on the one hand, the activities that are carried out internally in the company to guarantee the quality of the products purchased. On the other hand, a benchmark will be carried out to find out and analyse the suppliers available on the market and the characteristics of what they offer.

Some of the data collected in the supplier control plan are:

  • Need for the purchase of raw materials, products and/or services: the plan must determine the real needs of the company in order to subsequently determine the relevant specifications for the supplier regarding the characteristics that the necessary material must meet.
  • Purchase specifications: included in a series of technical documents where all the specifications of the product to be purchased are set out.
  • Initial evaluation of suppliers: it is necessary to draw up a list of the suppliers available on the market, in order to determine which are the most suitable. To do this, it is necessary to collect all the information on each supplier, creating personalised profiles adapted to the company’s financial and quality criteria.
  • Control and purchase of purchased products: Each purchased product must go through an exhaustive quality control process. If any product fails to comply with the pre-established agreements, it will be returned, pending due compensation.
  • Incidents: Any detail that does not comply with the agreements established in the purchase specifications must be reported in a timely manner. Returns, reprocessing and isolation of goods not suitable for sale will appear in the incident report.

The most popular SRM software on the market

Supplier management involves a number of processes that can be optimised through automation. This is made possible by Enterprise Resource Planning (ERP) systems, which often have SRM modules.

Some of these most popular systems on the market are:

  • Vendor Link: SRM system developed by Manthan and focused on providing absolute agility to both suppliers and customers. This is possible thanks to its process collaboration and data collaboration modules.
  • SAP SRM: SAP is recognised by IDC MarketScape as the world leader in ERP services. The SAP SRM solution provides functionalities such as:
    • Purchase-to-pay optimisation.
    • Catalogue management.
    • Self-service purchasing.
    • Planned purchasing.
    • Service procurement for large complex services.
    • Operational and centralised procurement.
    • Centralised contract management.
    • Operational reporting.
  • Oracle ERP cloud: this Oracle platform provides the following business management solutions from the cloud:
    • “Enterprise Performance Management”.
    • Supply Chain.
    • Risk Management.
    • Project Portfolio Management.
    • Procurement.
    • Finance.
  • Sage ERP: is a business management application whose resources are adapted to the needs and size of each company.
  • Infor: its Infor M3 solution is an ERP specially designed for manufacturers and distributors, while its Infor LN solution is an ERP in the cloud aimed at complex manufacturing and industrial companies.
  • Microsoft Dynamics 365: Microsoft’s ERP solution is oriented to cover diverse business needs, unifying and automating processes. Although SAP still dominates the global ERP market, Dynamics 365 is beginning to gain ground, climbing to second place among the most used applications, according to Panorama Consulting Solutions.

At Cognodata we support companies in the definition and design of supplier management strategies. We evaluate the needs of each particular business and implement the technological tools that best suit the objectives of the organisation. In this way, we achieve ROI optimisation and maximum efficiency in the management of business resources.