In a survey of 223 procurement, supply chain and supplier relationship management by the consultancy, State of Flux, almost two-thirds said that they did not have a definition of Supplier Relatinonship Management (SRM) in their companies. The conclusion of Alan Day, Managing Director of State of Flux, a supply chain consultancy in the UK, was that organizations are confusing SPM with SRM. SPM, he asserts, is “about getting what you have been promised in a contract, whereas SRM is about collaboratively driving value as part of a two-way relationship.” It may be a matter of semantics, but I disagree. There may be no definition of SRM in many companies, as the concept remains amorphous. Senior management often views SRM as “goodness” without a defined ROI and thus does not consider it a priority.
Tracking supplier compliance against contract terms is not SPM, however. It is just one tactical part of SPM. The purpose of SPM is to obtain a result, which is reducing risk and improving performance. Understanding supplier performance is more than ensuring that requirements are met and should involved a two-way flow of information. To the extent that a customer and supplier have a relationship, the more insights a customer firm will have into performance and the more chance that the supplier will improve performance. SPM requires collaboration between customer and supplier to be successful. State of Flux defines both SPM far too narrowly.
Day’s assertion that SRM “tends to be an add-on to the day job of buyers and category managers, rather than a core role” is true in the case of companies that do not have a supplier management function distinct from the sourcing function. Buyers are typically spending their time focusing on new procurement rather than managing and maintaining relationships within the current supply base.
Can you successfully manage performance without having a relationship with a supplier? Not likely. Supplier Performance Management without some type of Supplier Relationship Management is an empty process.