This is Part II of a 3-part blog series.
Recap from Part I:
In Part I (which you can check out here) we introduced the concept of Supplier Relationship Management (SRM), a growing area of attention in today’s most successful D2C brands (amongst others). When SRM is optimized, brands save TIME through more efficient workflows and MONEY through reduced supplier costs, all while building the best possible products.
So what does SRM actually look like in an organization? What best practices can we steal from today’s innovative brands? Time for Part II…
Four Best Practices to Achieve Winning SRM
The journey to optimizing SRM does not start and end overnight. That’s why LVRG interviewed dozens of the most innovative D2C brands, and we’ve boiled it down to four fundamental SRM best practices that your brand can apply on your own journey to supply chain success.
Approach suppliers as partners (relationships matter!)
Suppliers and buyers haven’t always had the best relationships - they’re frequently transactional, uncomfortable, and laden with debates around price. We intuitively see the value of building close relationships with our customers - so why do we overlook those same benefits with our suppliers?
Tips for building a PARTNERSHIP with your suppliers:
- Show that you care about them. In order to treat a supplier like a true partner, you need to show that you care - even when you don’t need anything. Ask about their family life. Share your business updates with them. Message them when you get positive customer reviews as a result of their goods/services.
- Ask for their advice and opinion. Your suppliers are experts in their field. Ask for their support and ideas for improvement. Keep up with their road-map. Find common values and areas to innovate together.
- Be a good buyer. Your suppliers are running a business, too. Don’t bail on meetings. Pay invoices on time. Keep your promises (and don’t over-promise on purchases).
Standardization doesn’t mean treating every supplier the same (in fact, we encourage the segmenting or tiering of suppliers). Instead, it means adopting common, established and accepted practices for all suppliers within a given tier or category. Standardization has several benefits:
- Enables departments to communicate effectively and clearly, both which each other and the supplier
- Aligns workflows and drives process efficiencies
- Provides a common language and metrics around which to evaluate supplier performance
- Helps maximize repeatability as a business scales
Take ownership of the relationship internally (don’t outsource it)
Outsourced SRM risks detaching organizations from their suppliers, prevents the sharing of values and objectives, and hinders the formation of strong mutual commitments. Though it may be tempting to outsource supplier management in a time-saving effort, research suggests that detached relationships yield a lower return on investment.
As it’s likely a number of departments interact with any given supplier (from procurement to product, finance, marketing, etc), the relationship should be approached as a team with open lines of communication. When a supplier is critically impactful to a brand’s success and/or strategy, the involvement of an executive at quarterly or annual reviews is another good way to demonstrate their value to you.
Finally, technology practices are crucial to SRM optimization. As a brand grows, so too do its supply chain complexities and the need to accurately record supplier data, track engagements, and monitor for performance over time. Implementing the appropriate systems early - perhaps even earlier than the pain is felt - will save a lot of headaches down the line and it’s important to invest in supplier relationship management software to keep information housed neatly in one place. Though not a solution in and of itself, IT is an important enabler for improving process efficiencies and encouraging inter-departmental collaboration.
The Main Message
Optimizing SRM is a journey. Yet by addressing these four fundamental best practices, your brand can begin reflecting on the current status of your business and identifying areas of improvement (aka. opportunity!).
Now that we know what the best practices are, it’s time to get practical and talk about how to achieve them - and that will be the topic of Part III!
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.