This is Part I of a 3-part blog series. In Part I, we’ll introduce the concept of Supplier Relationship Management (SRM) and the benefits of doing it well. In Part II, we’ll cover SRM best practices, and in Part III, we’ll provide tips and guidance for implementing those best practices at your brand.
In an increasingly competitive market frequently driven by razor-thin margins, supplier relationship management (SRM) is so softly spoken about that it nearly warrants suspicion. Could SRM be the well-kept secret to success behind today’s fastest growing, headline-stealing brands? An examination into the benefits of optimized SRM and the companies currently adopting best practices suggests this might indeed be the case – and it’s time the secret be revealed.
We’re all familiar with customer relationship management – but the adoption of CRM tools and customer best practices is so widespread that it’s become a challenge to use CRM in any form of competitive advantage. Simply stated, it’s the status quo. Supplier relationship management, on the other hand, is only recently creating buzz, and presents a tremendous opportunity to those companies who learn to leverage it.
“Supplier relationship management presents a tremendous opportunity to those companies who learn to leverage it competitively” - Principal, consumer-focused VC
What is SRM?
Supplier relationship management refers to the practices and processes by which companies interact with their suppliers. It involves a thoughtful, organized approach to daily interactions and strategic assessment of a supplier’s performance, contributions and criticality to business success. It also means having systems and processes in place to properly manage those interactions as a team.
Important everywhere but critical in industries such as consumer packaged goods (CPG) and the broader direct-to-consumer (D2C) market, suppliers provide the necessary goods and services that a company needs to service its own customer base, and thus, grow revenue. As outsourcing trends upwards and margins downwards, companies have quickly begun to realize that – more now than ever before - successfully leveraging their suppliers with purposeful relationship building is paramount for prolonged success. Look at Harry’s, Away, Glossier, Snowe… these and other innovative brands are finding ways to optimize their supplier relationships for the win.
Where’s the Gain?
According to PwC, companies that optimize SRM frequently report of wealth of benefits that - either directly or indirectly – translate to a better bottom line.
“Brands who optimized SRM reported receiving preferential treatment from their suppliers and built better overall product” - PwC
- Reduced costs
- Reduced supply chain risk (greater availability of product)
- Shortened delivery windows
- Increased supplier-led innovation
- Better overall product (greater quality)
- Saved time (coordinated engagements)
The Main Message
Through intentional SRM, the strategic brand addresses their suppliers as part of a team – driving optimized performance and maximum ROI. So how does one achieve optimized SRM, and what does it look like? Realizing the many benefits of strong SRM may necessitate procedural changes, new technology adoption, cultural shifts, or a combination of all three. It will likely involve integrated, forward-thinking teams, open inter-departmental communication and technology to make it all easy.
In Part II of this blog series, we’ll dig into best practices that facilitate SRM (ie. what SRM looks like), and in Part III, we’ll make suggestions as to how a company might achieve those best practices.
Need to Know Now?
Can’t wait to unlock the secrets of SRM? Reach out to LVRG – we’re always excited to swap secrets with forward-thinking brands, and we have a few ideas on how you can get started.