Julie Fraser: Managing supplier relationships beyond strategic sourcing

Strategic sourcing is a critical start to a supplier relationship, but it is not sufficient. So why is it that we hear so little about supplier relationship management (SRM)?

July 23, 2009



High profile news stories about

tainted or unsafe toys, food, computers, and pharmaceuticals point to a problem

every manufacturer faces: managing suppliers. Companies can suffer immeasurable

brand damage when a supplier’s quality slips, not to mention the more concrete

costs of recalls, customer alerts, and lawsuits.

As industry networks stretch beyond

traditional regional boundaries and companies seek to limit travel, differences

in communication styles and culture will only increase these risks. Strategic

sourcing is a critical start to a supplier relationship, but it is not nearly

sufficient. Once a supplier is selected, the ongoing work of monitoring and

helping improve their performance and practices begins.

This involves rationalizing and

consolidating sourcing, managing parts and suppliers, controlling contracts

through their lifecycle, evaluating and delivering supplier scorecards, and

collaborating with suppliers to better ensure mutual success. So why is it that

we hear so little about supplier relationship management (SRM)?

One reason may be that it’s now

often a component part of larger software suites. For example, i2, Oracle, SAP, IBM

and JDA, all have acquired and subsequently built out SRM

capabilities as part of their supply chain capabilities.


companies have also extended into certain areas of SRM.

Siemens PLM has Teamcenter for SRM with its services partner CapGemini. Dassault

works with i2. Most of the PLM

focus is on sourcing and supplier selection, but it can be extended across the

life-cycle successfully.

The supplier selection process can

also be supported by buying sites such as GlobalSpec, PartMiner, and Mfg.com. Look

for the ability to build up relationship data and scorecards over time, not

just during selection.


for collaboration

A private or public network can be a

dynamic and low-infrastructure means to collaborate and manage suppliers

effectively. While exchanges such as Axway, ChemConnect, DemandTech, e2open, Exostar,

and GXS started as EDI-focused, these now provide deeper buyer-supplier


There is one other angle of supplier

relationship management that is not well known, and it may be a cornerstone to

success in this volatile environment: supplier risk management.

Such software can help predict

whether and when a supplier will have a glitch-whether in finances, quality, or

delivery. Dun & Bradstreet has added this capability to its portfolio

through acquisition, and has some major customers reaping extraordinary


Companies must learn to work with

suppliers as effectively as if they were part of their own company. This

requires a new level of communication and collaboration to build the trust and

visibility that allows everyone to truly create win-win situations. SRM can contribute to:

Perhaps this is the year-while

volumes for many products are relatively low-that companies will re-focus on

the supply base. SRM is not the

answer to the questions, but it can reduce the effort needed, and help ensure

that sound processes are in place and working reliably.


Fraser is Principal Industry Analyst at Cambashi, and has been an industry

analyst, consultant and marketer for over 20 years, specializing in manufacturing

value network processes and systems. She can be reached through Manufacturing Business Technology or at Julie.fraser@cambashi.com .

See also:

Surveys: Supplier

risk concerns shift, grow by Roberto Michel