Supplier Relationship Management (SRM)

Supplier Relationship Management

The term "Supplier Relationship Management" (SRM) refers to the use of technologies by an enterprise to improve the supply mechanism at its suppliers. Just like employee relationship management, this concept is based on customer relationship management.

The goal of SRM is to allow an enterprise to improve communication with its different suppliers, share a methodology, business terms and information with them and improve familiarity with each other to optimize the supply process. In turn, SRM is also intended to ensure that suppliers familiarize themselves better with the core business of the enterprise and its different products to ensure a customized supply.

SRM Processes

SRM solution editors generally define a process comprising four large stages:

  • Cooperative design, consisting in integrating the supply problems from the time a product is designed by involving suppliers via a cooperative design tool while ensuring a minimum cost at all levels;
  • Identification of suppliers (sourcing), whose purpose is to identify potential suppliers and to prepare a scorecard by qualifying them in accordance with their cost, production capacity, delivery deadlines, and their quality guaranties. At the end of this stage, the best suppliers can be invited to submit bids;
  • Selection of suppliers , via a reverse auction mechanism, where the roles of the buyer and of the seller are reversed. The SRM tools generally have a bidding interface which makes it possible to make three types of requests (commonly called "Request for x" and written RFx) :
    • RFQ (Request For Quotation), i.e. a simple request to quote prices for relatively common products. The supplier who submits the lowest bid is generally selected;
    • RFP (Request For Proposal), i.e. a request directed to suppliers to submit a commercial proposal, specifying a price, but also information on the company, its solvency, production capacities, stock and delivery deadlines, etc. A supplier is selected in accordance with a selection system which makes it possible to evaluate the proposals in accordance with different criteria.
    • RFI (Request For Information), which consists in issuing a simple request for information regarding the products and services offered by the suppliers, which does not necessarily imply any bidding.
  • Negotiation, whose purpose is to formalize the contract between the enterprise and the selected supplier, possibly including specific clauses regardign logistics, terms of payment, service quality, or any other special duties.
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