Author: Shanna McEachern
This is Part III of a 3-part blog series.
Recap from Parts I and II:
In Part I (here) we introduced the concept of Supplier Relationship Management (SRM) and discussed how optimizing SRM has helped innovative D2C and product-producing brands save both time and money while building awesome products.
In Part II (here) we examined dozens of successful D2C brands and extracted four fundamental best practices that your brand can replicate to achieve winning SRM.
But now that we know what the best practices are, how do we go about actually implementing them? We’ve boiled it down to 10 simple steps. Time for Part III…
How to Implement SRM Best Practices: 10 Steps
As you’ll remember from Part II, the four fundamental SRM best practices used by the most successful D2C brands are:
- Approach suppliers as partners (relationships matter!)
- Seek standardization
- Take ownership of the relationship internally (don’t outsource it)
- Leverage technology
Now it’s time to take action. Here are 10 steps to help you actualize those best practices at your firm today.
Get executive buy-in
If the executive team has not yet been involved in the SRM conversation, loop them in. When things get busy and priorities are pressed, executive support is a pre-requisite to ensuring SRM best practices are upheld regardless. Further, when the executive team instills SRM in the organizational culture, everyone in the company will work to uphold standards, remove barriers and solve problems to get it done.
Before approaching the executive team, ensure you clearly understand your organization’s strategic objectives, the focus of each executive in achieving them, and be able to communicate how suppliers play a role in that. Would improved visibility into ongoing supplier engagements and transactions benefit them? Can supplier metrics be captured to help them quantify the obtainment of their individual goals? This bleeds into #2.
Define your major business goals / KPIs and identify where suppliers support them
Now that you understand the overarching goals of the executive team and the business at large, ensure KPIs (key performance indicators) have been defined for each department. It’s likely that management in each department are already tracking the metrics most important to their organization, but identifying how and where suppliers contribute to those KPIs is a second step that (according to our research) is often missed.
Translate those KPIs to metrics that your suppliers must meet
If you know when and how a supplier influences business objectives, you can begin defining specific metrics that the supplier must meet (at minimum) in order for your brand to achieve those objectives. Here’s an example:
Your Operations department has implemented a KPI around delivery:
Achieve on-time delivery of product to the customer for 95% of all orders.
To hit 95% on-time delivery from brand to customer, within what time frame must a corresponding order to a supplier be placed and received? Is the supplier required to deliver within 5 days of order placement for you to hit your goals? If so - that’s the supplier metric you need to track. Ensure those metrics have previously been discussed and agreed with the supplier for feasibility before finalizing them.
Build a holistic list of your suppliers (know who’s who)
Which suppliers is your company contracting right now, and who have you engaged in the past? Which suppliers are in the early prospecting phases but have not yet entered into a contract? You’d be surprised how few brands can answer these questions quickly - but transparency into the who’s who is critical to avoid redundant conversations, overlapping contracts or unnecessary sourcing activity. Your brand should have a holistic, shared supplier master list that includes, at minimum:
- Supplier name and parent company
- Status (active, inactive, prospecting)
- Addresses (shipping, manufacturing, invoicing, etc)
- Categories / capabilities
- Financials (Annual spend, payment terms, currency, etc)
- Your assigned supplier team (insight into who engages / supports the supplier)
Guided by steps 1-4, tier your suppliers (know where you should be devoting most of your attention)
Which suppliers are most critically connected to your business KPIs, and which have the most stringent performance metrics to be tracked? Which are involved in a variety of product lines, capture a large portion of your spend, and involve a number of your internal teams or departments to support business initiatives? These suppliers are disproportionally important to your business and should receive a respectively higher amount of your time and attention. Suppliers can be tiered in a number of ways (too lengthy to discuss here), but tiering will help you allocate your time where it matters most and dedicate supportive activities (such as performance reviews and bi-weekly meetings) appropriately.
Map out your relationships and ensure team members are committed and engaged
Who’s actually liaising with your suppliers on a daily basis? You’ll likely have touch points across multiple departments, from sourcing to operations, finance, product and more. Consistency of face is important to ensure communications are streamlined and messaging clear, so if engagements are happening ad-hoc across the teams, it’s time to change that. Assign dedicated support members across each department to build a supplier ‘team’. Get the team together to ensure everyone is clear on their roles and responsibilities. Talk about hand-off between departments and allow the opportunity to ask questions - you may unveil workflow challenges not previously surfaced. You may also wish to define out-of-office processes and support people. When the entire supplier team is committed and engaged, you’ll benefit from clear and direct communications with the supplier.
Build a standardized strategy for engaging each tier of suppliers
Once your suppliers have been tiered (however you chose to do so) and the supplier teams identified and defined, it’s time to define the strategy of engagement for each tier. For all Tier I suppliers, for instance, you may collectively choose to implement quarterly business reviews (where the relevant supplier team members sit down with the supplier face-to-face) and weekly internal stand-up meetings to review any ongoing initiatives. All suppliers within a given Tier should receive the same strategy, and all identified supplier Team members should buy in. We recommend that the most business-critical Tier of suppliers should include regular performance reviews, which is discussed in #8.
Set up regular performance review meetings and a means of tracking supplier metrics over time
You’ve already tiered your suppliers, translated KPIs into measurable metrics, and set a standardized strategy for engagement. Now it’s time to establish procedures for actually tracking those performance metrics over time and establishing regular performance reviews with the supplier to review areas of strength or weakness. Only through purposeful and regular performance measurement will you be able to identify areas of risk within your supply chain and make corrective actions with your suppliers accordingly. To do so, you will likely need to create supplier scorecards and set up a system for soliciting input from internal departments. (Hint: this is something LVRG can help with, though its a longer discussion than this blog post! Reach out)
Leverage technology to achieve the above
We live in a tech-enabled world, and that’s a good thing! With so much to keep track of (from the supplier master list to contacts, files, and ever-changing performance metrics), an efficient brand knows how to leverage technology to get the job done more efficiently. With email integration, automation and team-based workflows, the LVRG SRM platform helps modern-day brands optimize SRM with less work.
Reflect, review and iterate regularly
Inevitably, things change over time. New team members join the company, new suppliers are contracted, business lines are launched, and so forth. If you took the time to prioritize SRM in your company, you’re now likely reaping widespread benefits… and it’s worth establishing an annual or bi-annual reflection meeting to ensure the processes you put in place at the beginning are still aligned. At that meeting, bring together all supplier stakeholders and management to review:
- The importance of optimized SRM and how your internal culture supports it
- Any changes to business goals / drivers and how they impact KPIs, which ultimately influences the supplier metrics to be tracked and measured
- Any changes to product lines or spend that could shift supplier importance or tiering
- Supplier additions, exits, or new prospecting activity that need to be captured on the Master list if not already
- Team additions, exits, or departmental re-organizations that could affect supplier account support - plus any need for training on the systems and processes used to support those suppliers
- Any feedback regarding supplier performance reviews or overall engagement strategy - what’s working, what’s not, and how can things be improved
The Main Message
Implementing SRM at your brand need not be a complex process, but like any important business transformation, establishing priority will be important to ensure the benefits are fully realized. Brands who prioritize SRM have recognized the critical role their suppliers play in enabling them to produce quality product, satisfy customers and generate revenue. They have established executive buy-in, communicated the vision across the organization, ensured all team members understand their role and responsibility in supporting the supplier base, and implemented systems and processes to facilitate transparent, streamlined workflows.
This is where LVRG comes in. On a mission to support modern-day brands through effortless supplier relationship management, the LVRG platform helps brands manage suppliers and track performance as a team, ultimately boosting business scalability. When managing each supplier relationship is easy, brands save time through efficient workflows and money through stronger, smarter supplier engagements. Build an automated supplier master list, tag and tier suppliers, build performance-tracking scorecards and more. Reach out to LVRG
Ready to get started?
If you’re keen to expedite the 10 steps above and see what benefits SRM can bring to your business, reach out to LVRG for a free, no-commitment trial of our platform. We’re singularly focused on making SRM easy to help you scale your business with ease.