What is Supplier Relationship Management?

Supplier relationship management (SRM) is basically a partnership approach between a business and its key suppliers. It works on similar principles to executive account management services from a company to its top customers. Rather that one business simply purchasing products from another, a mutually beneficial relationship is built and maintained between companies.

Aspects of this business relationship typically include many formal corporate tools such as requests for proposals (RFPs) and price negotiations. Suppliers provide customized services for their SRM partner clients such as extensive sourcing and product knowledge. Buyers in supplier relationship management partnerships communicate with suppliers about products they need so that ordering arrangements can be worked out for them. They don't simply place orders, but typically speak with an account executive who handles only the most important customer accounts.

In most industries, a key account manager is given the company's most profitable client accounts. In many cases, this person will also be given the most valued supplier and distributor accounts to monitor. This action is a common component of supplier relationship management. Suppliers in relationship management partnerships with their clients often order their needed supplies from them. For example, an office furniture company with an electronics store as a top client would be likely to purchase the new computers it needs from this business with which it's building a working relationship.

Buyers and suppliers involved in this beneficial working relationship usually don't limit their contact to phone calls or emails, but will have representatives visit in person at least on occasion. In-person contact can increase the perceived value of the relationship, but also increase profit as it often results in more sales. Since supplier relationship management is about building and retaining that business connection, most people want to meet with an account executive in person. Typically, the account executive's manager as well as the owner of the company also meet face to face with the supplier, at least from time to time.

Since SRM participants work on building mutually beneficial relationships, the attitude between both participants is usually one of mutual respect and appreciation. Attentive, personalized service and special gifts are some of the "perks" of this type of buyer-supplier relationship. Managing the supplier relationship takes communication, planning, implementation, maintenance and follow through on commitments. Supplier relationship management helps each partner maximize profits and grow each other's business through loyalty, respect and the best service possible.