Question

What role does supplier relationship management play in creating value in the procurement process? Provide a detailed explanation.

Answer 1

Supplier relationship mangement creates value for the procurement process in following ways.

(i) Suppliers fuel the growth of the company by providing high quality supplies to a company, thus should be considered as a strategic partner in growth, not another stakeholder. Strategies should be such that they result in mutually beneficial alternatives and create a win- win situation for both parties, which is essential for a long lasting, sustainable  relationship.

(ii) Suppliers are the one which are responsible for the proper functioning of back end of supply chain. They need to be developed and helped with technological know-how to be able to meet the changing requirement of the company. For this, the suppliers should be an integral part of technological transformation of the company through digitisation.For example, the ERP implementation in the company should include suppliers /vendors as an integral part. Integration of suppliers with the processes might reduce lead time, improve the quality of product / service and reduce the issues resulting out of communication gaps.

(iii) Supplier communication helps the organisation with vital information about the backend of the supply process. The role of supplier for the back end is just as the role of retailer or wholesaler at the front end. The information from the supply side might help the company in taking strategic business decisions, leading to competititve advantage.

(iv) Stable and dedicated supplier base improves certainty and continuity of operations and enables the company to take long term strategic decisions involving them.