SCRM Enhances Supplier Relationship Management

Supplier relationship management is by no means a new concept in the procurement world. Neither is consideration of risk as part of supplier relationship management—but the demands of risk in SRM have grown and changed. Traditionally, procurement professionals have focused primarily on financial health to mitigate risk. As globalization and supply market volatility increase, however, the requirements behind what makes a good supplier relationship management strategy are shifting.

Here’s the bottom line: If you’re not enhancing your SRM program with risk management capabilities, then you’re leaving your organization more exposed to risk than ever. The traditional ways of managing your suppliers aren’t enough. You need to consider more types of risk, more sources of information and more risk from your sub-tiers. It’s time to move your SRM to the next level by establishing an supply chain risk management strategy.

• Although financial health is often the main focus when it comes to managing supplier risk, according to Gartner, out of 180 respondents, within the past five years only 36% of supplier risk events were related to supplier financial risk. (Source: Gartner Supply Chain Executive Conference Summit Presentation, “The Realities of Supplier Risk Management, 2018,” May 2018.) Supplier relationship management should address all types of risk, and an SCRM program can help.
• 69% of companies report that they do not have a system in place for enterprise-wide reporting of supply chain disruptions. (Source: Supply Chain Resilience Report 2017, Business Continuity Institute.) An SCRM program can help you proactively address this element of supplier relationship management. 
• Gartner notes in a recent survey that only 42% of companies say that they become aware of risks and/or disruptions that occur in the supplier base immediately or very quickly and have a course of action predefined. (Source: Gartner Supply Chain Executive Conference Summit Presentation, “The Realities of Supplier Risk Management, 2018,” May 2018.) An SCRM program can bring you one step ahead of the competition.

• Build consensus with key stakeholders that a robust supplier relationship management program must address supply chain risk.
• Enhance segmentation, awarding and performance measurement by including risk metrics.
• Understand that to fully and effectively manage your suppliers, you need something more than a spreadsheet. An SCRM solution can help.