In today’s fast-tracking world economy, manufacturing companies have to deal with customer ever growing needs, decrease product life cycles and sharp price increase. The ambition to continually cut costs and focus on core competencies has driven many companies to outsource production. With increasing dependence on outsourcing, managing close good relationships with the large supply base on a real-time basis becomes critical.
Supplier relationship management (SRM) is the methodical approach of evaluating suppliers’ contributions and impact on success, determining tactics to maximize suppliers’ performance and developing the strategic approach for making the best out of these determinations.
So why Supplier Relationship Management is so important?
Supplier relationship management (SRM) focuses on taking full advantage of the value of a manufacturer’s supply base by delivering an integrated and holistic set of management tools focused on the interaction of manufacturer with its suppliers.
The SRM solutions can become a competitive advantage in several areas:
- Intense cost savings by enabling efficient business processes and improved information flow. The SRM focuses on improving cross-functional and inter-enterprise processes.
- Constricted replenishment performance, reduction of excess inventory, elimination of non-value-added tasks provides large savings to the manufacturers.
- SRM enables higher flexibility and responsiveness to customer requirements and collaborative planning with suppliers.
How SRM relates to ERP System?
The areas of product development, starting new ordering processes and inventory control can deliver a range of financial and operational benefits to both operators and suppliers. An integral component of many ERP software solutions is supplier relationship management. Working together with its suppliers, a company can adjust its supply chain to meet its special needs. Processes can be consolidated, costs can be reduced, and the end product for the consumer can be improved.
SRM leads to better outsourcing. By building up trust with its best suppliers, organizations can outsource non-critical tasks to them. This reduces the load internally, but it also allows buyers to get service or industry expertise and become better able to serve your company.
Abstracting the ERP system
SRM system abstracts the ERP system, leveraging its capabilities, while hiding its details from the user who is instead provided a highly tuned role-based process information-set aimed at efficiently supporting the user’s business objectives. Having good and close relationships with your suppliers can make a difference to business operations.
How ERP systems can improve your SRM?
- Ensuring highest quality communications with suppliers demonstrates competence and warmth which are the most valuable attributes in business. Using ERP for inventory control enables you to offer better earlier warnings for quantity adjustments which will improves resource planning and assist in building supplier respect.
- An ERP system enables sharing data with suppliers to improve supply arrangements and monitor performance. It reduces the need for emails and documentations. Using your ERP you can respond quickly to a supplier request of information.
- Managing all business processes by ERP can add value to the relationship with suppliers by having all suppliers’ details as payment terms, lead times, prices and products pulled out quickly. This ability translates into better communication and smoother and easier ordering process.
- An integrated ERP system will assist in creating a strong supply chain leading to a lean and agile business. This may require you to make changes to your inventory and production processes which partly may impact your suppliers which will benefit from creating a lean and agile supply chain.