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Supplier Relationship Management (SRM) Tools Guidance Notes The document outlines the CIPS SRM Tools created to help you to develop the right environment for more collaborative relationships with strategic suppliers to enhance value and reduce risk for your organisation.

CIPS members can record

one CPD hour

This knowledge paper is supportive of Procurement professionals operating at operational level of the CIPS Global Standard

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CIPS SRM Tools Guidance Notes Supplier relationship management (SRM) involves the effective and appropriate management of a procurement professional and their supplier. Good SRM involves creating closer, more collaborative relationships to maximise value and reduce risk.

It is important to differentiate between SRM and Supply Chain Management (SCM). SRM is an important part of SCM to ultimately create the right relationship and environment to promote efficiencies and ultimately increase an organisation’s profitability if private sector, increase the benefits to the people if public sector and maximise awareness of a cause if third sector.

SRM relates to the interaction between procurement and suppliers, strong and effective communication, managing stakeholders, being aware of risk as well as ensuring a sustainable future for the project and profession.

SRM tends to be at a higher level of focus in collaborative relationships rather than arm’s length and more important in strategic purchases than routine.

For additional reading you can access the CIPS SRM guidance here.

To download the tools covered in the document please click here.

Tools

o Supplier Relationship Management (SRM) o Scope Of Relationships o Supplier Relationship Lifespan o Buyer Supplier Handshake o Conflict Resolution o SRM Speed Limit o Feedback o Reporting On KPIs o Optimum SRM

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1. Supplier Relationship Management (SRM)

The SRM model summarises what comprises SRM.

The four main aspects attributed to strong SRM are ethical conduct, accountability, governance and effective communication.

Through creating the four main aspects areas such as sharing technology, innovation, managing risk, collaboration, trust and transparency will develop – enhancing the already positive relationship between the supplier and the procurement professional.

In achieving all the aforementioned aspects the final three categories of positive SRM will be seen. These are sustainability, feedback and improvement and performance management.

(Source: Jarvis-Grove, 2020)

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2. Scope of Relationships

The Scope of Relationships model explains the variety of styles of relationships that a procurement professional can experience and manage with their suppliers.

The relationships are based on the levels of trust, openness, commitment, risk mitigate and communication. Lower levels of these key factors result in adversarial relationships whereas high presence of the key factors promotes the optimum level of relationship - collaborative, partnership and joint ventures.

(Source: Jarvis-Grove, 2020)

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3. Supplier Relationship Lifespan

This model demonstrates how all supplier relationships develop. All start with the introduction phase where a buyer and a supplier first meet or first communicate in some form. At this stage there are low levels of trust, innovation and reliance – purely because neither party know much about the other.

From introduction comes rapid change as the relationship moves from the first stage to growth. In this period there is a steep learning curve over a relatively short period of time whilst both the procurement professional and the supplying company representative begin to learn about each other, their ways of working, the visions of each others’ companies and the ethics of how each conducts business.

After growth the next phase is maturity, at which point the relationship is at its optimum level. There is a high level of trust, lots of innovative opportunities and reliance is key between both parties in order to succeed and add value. Maturity is the longer stable period within the model and this is where performance and SRM will be at the optimum.

After maturity comes decline. Decline may happen for a number of reasons. This could be a natural end to a relationship if the product or service is no longer required, the contract could have come to its agreed termination date or it could be that there has been unresolvable conflict.

The decline phase usually happens quite quickly and this results in termination. If SRM has been effective then termination need not be negative and the relationship can end with positivity towards new future opportunities.

If SRM has not been effective the termination part of the lifecycle could result in bad reputations being generated or at the worst a legal case.

(Source: Jarvis-Grove, 2020)

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4. Buyer Supplier Handshake

The Buyer Supplier Handshake model shows, through the use of a handshake graphic which represents agreement, the main benefits created when SRM is done well. These benefits are openness, risk aversion, innovation, support, communication, reduced costs, consolidation, sustainability and trust.

The benefits that will be apparent will be relevant to both parties in the relationship.

(Source: Jarvis-Grove, 2020)

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5. Conflict Resolution

This model shows that there are five main ways in which conflict can be resolved.

If as a procurement professional you have a high concern for the relationship i.e. you have a conflict with a key player and you want to achieve your objective, the style of resolution would be based on working together and/or finding a middle ground. This style would involve communication, listening and showing empathy to enable a resolution based on compromise and meeting in the middle.

If at the other end of the scale conflict arises with a stakeholder who has little or no impact on the project and the procurement professional has no concern for the relationship, the style is more likely to be a competitive one whereby the procurement professional pushes to get their objective met, usually to the detriment of the other party.

Another case of conflict resolution relates to having to back down if the concern for the relationship is high and the importance of achieving the objective is of minimal impact.

The final option is that if both the desire to achieve the objective and the concern for the relationship is low, the conflict may be avoided or ignored as there is little or no point in causing any problems for something of little importance.

(Source: Jarvis-Grove, 2020)

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6. SRM Speed Limit

This model demonstrates the qualitative and quantitative benefits that can be achieved through good SRM.

The needle on the speedo shows that up to the safe speed areas such as attentiveness, innovation, trust and support can be measured but without any exact numerical data – these are qualitative benefits.

After the safe speed (40) is exceeded the model shows exact figures and this represents the quantitative aspects of strong SRM that can be precisely measured.

Areas such as the amount of money saved and the quantity of faulty products can be measured quantitatively and the benefits seen in hard data.

(Source: Jarvis-Grove, 2020)

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7. SRM Feedback

Feedback is an important part of SRM.

If a supplier of supply chain partner is not aware of what they are doing well or maybe more importantly what they are not performing acceptably, they cannot be blamed for their lack of knowledge.

Giving feedback should always be constructive in order to achieve the best outcomes for moving forward.

Constructive feedback includes the use of facts and figures (quantitative data) and discusses the impacts.

Destructive feedback is the use of generalised comments, no substantiating information and the use of blame rather than looking to find a mutual solution.

(Source: Jarvis-Grove, 2020)

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8. Reporting On KPIs

Part of strong SRM is the use of effective communication and the ability to provide fair and factual feedback to the supply chain partners.

Using KPIs (Key Performance Indicators) and SLAs (Service Level Agreements) is a good method of recording supplier performance.

This template can be used to record the results of KPIs and SLAs.

The template allows for the KPIs and SLAs to be amended to suit the procurement professional’s needs.

The KPIs in the template represent the quantitative areas of measurement whilst the SLAs show the qualitative data.

KPI results are recorded in numeric or percentage styles whilst the SLAs are a generic yes or no or high or low.

Once populated the template will produce a column graph to show a visual of up to four suppliers’ performance.

This visual can be used in supplier review meetings without breaching any GDPR regulations on data as the suppliers are simply called supplier 1-4.

(Source: Jarvis-Grove, 2020)

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9. Optimum SRM

If optimum SRM is achieved the benefits can be significant.

Excellent SRM should be present in a collaborative or stronger relationship and should be seen throughout the supply chain from the extraction of raw materials, to the manufacturing process, to the logistical operations and finally to the consumer.

In displaying optimum SRM the benefits achieved will include collaboration, planning, cross-functional team working, shared success, innovation, a win-win outcome and ultimately a sustainable solution for all parties involved.

The resources needed to achieve optimum SRM are significant and as such it is important to only focus on such high levels of interaction with suppliers where the relationship is key to organisational success.

(Source: Jarvis-Grove, 2020)

CIPS members can download the tools covered here.

Leading global excellence in procurement and supply