Supplier Relationship Management: How to reduce risk and improve performance
2020 stretched supply chains to the breaking points. Many brands have been forced to rethink the future of supply chain management, and the optimisation of supplier relationship management sits at the heart of that shift. It’s important that we build more robust and resilient foundations within the global economy. Here, we are going to look at leading trends to do just that.
In order to reduce supply chain risk and improve performance, organisations need visibility across their supply chains and simple means of communicating with suppliers. By harnessing digital tools to collect and analyse data, better strategic and tactical decisions can be made — and outcomes improved.
Here, we’re going to make the argument that effective adoption of modern EDI (electronic data interchange) is central to improve supplier relationship management in 2021 and beyond. Updates to legacy EDI methodologies have created more effective and efficient solutions (a trend we’ve labelled EDI-as-a-Service) that are able to drive efficiency and flexibility that can simultaneously create more robust and more transparent supply chain operations. Let’s get started.
Additional reading: If you want to learn more about how EDI can create a competitive advantage for you, check out our free eBook — The Supply Chain Centred Business.
What is supplier relationship management?
Supplier relationship management (SRM) is a systematic approach that works to evaluate supply chains in a way that one-third of companies admit to overlooking. SRM makes it possible to determine each supplier’s performance and contribution to overall enterprise success, and consider possible ways to improve that contribution.
On the surface, it may seem like SRM isn’t altogether different from other supply chain management disciplines but, while there are similarities, there are also significant differences. If anything, SRM’s closest comparison comes in the form of customer relationship management (CRM) because, unlike vendor management or procurement and supply, SRM focuses specifically on improving processes and relationships to maximise supplier value. Cost savings certainly still feature, but they aren’t a main priority.
Rather, supplier relationships are always the primary focus, and are typically streamlined using a three-step process that involves —
- Segmenting suppliers and categorising them in order of importance to overall success.
- Developing supplier strategies using data insights with the goal of building mutually beneficial long-term relationships through increased trust and simplified communication.
- Deploying SRM strategies while keeping monitoring at the forefront to ensure immediate recognition of deficiencies or points of failure.
These best practices are invaluable within modern supply chains, opening all parties to a wide range of benefits that include —
- Reduced costs
- Supply chain continuity
- Fewer risks
- Simplified contract management
- Increased responsiveness
That said, many businesses utilising SRM for the first time also come up against certain challenges. It can be hard to switch your evaluation mindset away from cost and towards value. More simply, however, a lack of visibility and insufficient communication can render an effective SRM process nearly impossible to implement.
Fundamentally, SRM success comes down to the ability to approach standardised forms of communication with flexibility and transparency in mind. Only then is it possible to prioritise the effective and mutual relationships that this strategic approach so surely relies on. The question, really, is how to achieve that goal in an increasingly complex supplier landscape. And, for an increasing number of companies, the answer is electronic data interchange (EDI.)
What is EDI?
EDI is a process and methodology for standardising and automating communication between businesses. By using standard formatting and compatible transmission protocols, EDI can simplify and standardise supply chains to enable the free flow of information.
Unfortunately, EDI implementations issues have long plagued traditional EDI deployments, creating setbacks including incompatible protocols and standards, complex onboarding, and siloed manual processes that typically prevent the efficient communications they aim to enable.
With the challenges of standard EDI in mind, some businesses have seen success with hybrid models that utilise various types of EDI (Web EDI, Direct EDI, etc.) Unfortunately, even hybrid solutions struggle to maintain supply chain management in this ever-changing landscape. EDI has been around since the mid-twentieth century, and updating standard processes in line with twenty-first century requirements in mind is critical to modern SRM success. Luckily, that’s exactly what EDI-as-a-Service offers.
While hybrid EDI and EDI-as-a-Service are sometimes used synonymously, the benefits on offer are different. Yes, EDI-as-a-Service utilises various types of EDI, but it goes further. EDI-as-a-Service is defined by two main things —
- Cloud-based tools: EDI-as-a-Service deploys cloud-based management and analysis tools to achieve the visibility that traditional EDI fails to deliver. This simplifies the management and review of data from across your supply chain, enabling more effective control of supply chain relationships.
- Managed services: EDI-as-a-Service embraces an outcome-oriented approach to EDI, and integrates managed services on-demand. This enables businesses that need help to seamlessly access that support when needed, and rely on self-service tools when it’s not.
Cloud-based access to data fundamentally enables greater visibility and simplified rollout. This improves EDI adoption across your supply chain — which is another critical factor for enabling communication and improved SRM outcomes. Benefits of EDI-as-a-Service include —
- One-source-of-truth visibility
- Flexible protocols and standards
- Simplified onboarding regardless of your EDI expertise
- Simplified adoption regardless of the EDI expertise of supply chain partners
- Creative planning and control
In an age where globalisation and supply chains have taken a significant hit, and new strategies like co-sourcing are taking hold, these benefits are more fundamental than ever. The ability to centralise, communicate, and automate supply chain relationships is important to your success, and EDI-as-a-Service can deliver.
How modern EDI transforms supplier relationships
EDI-as-a-Service addresses many of the SRM pain points touched on above, not least because of the centralised, simplified communications on offer. In fact, EDI-as-a-Service is uniquely positioned to take SRM to the next level with a range of focuses that include —
- Supply chain visibility: Visibility across a supply chain is fundamental to ensure effective planning and supplier recognition. Unfortunately, previously complex and siloed supply chain processes have stood very much in the way of that goal. By standardising digital information flows across different protocols and knowledge sets within centralised, cloud-based systems, EDI-as-a-Service aims to lift that veil and provide real visibility. Where SRM is concerned, this ability makes it easier than ever to understand supplier contributions and tailor an approach to supplier frontrunners accordingly.
- Two-way communication: Frontrunners like Amazon largely put their supplier success down to their focus on ever-improved communications. This has never been an easy goal to mimic with traditional and typically manual EDI solutions but, thanks to its position in the cloud and it’s focus on simplification, EDI-as-a-Service stands to open the doors for effective communications that flow back and forth. This ensures sharper strategic and tactical plans and new avenues for differentiation to improve supply chain relationships on the whole.
- Process optimisation: Optimisation reduces costs, which enables higher-margins and improved re-investment in optimisation — creating a virtuous circle and a long-term competitive advantage. This is an SRM fundamental that two-thirds of companies miss out on, and it’s something that EDI-as-a-Service brings within easy reach by merging communication, visibility, and automation for increased control, reduced costs, and reinvestment for further improvements and positive feedback loops.
- Collaboration: All of these benefits work together to ensure collaborative processes that turn vendors into strategic partners. This mutual footing makes way for increased understanding, enhanced value, and the ability to improve frontrunner contributions towards strategic goals. This enables the development of the best-informed supplier strategies, as well as ensuring better deployment and simplified, partner-led monitoring moving forward.
The future of SRM requires flexibility and transparency
The challenges supply chains face at the moment mean that now, more than ever, SRM requires flexibility and transparency. Unfortunately, this importance comes to the fore in an age where the physical spaces between businesses and suppliers are larger than ever. But, physical distance doesn’t inherently mean convoluted processes.
With the help of Data Interchange, it’s easier than ever to simplify every stage of your supply chain. Our EDI-as-a-Service implementations benefit from the knowledge of over 100 EDI experts with more than three decades of experience between them. By using a hybrid approach and SaaS tools to simplify every stage of EDI, we ensure that you can focus on finally building the supply chain relationships that stand to drive commercial success, regardless of the currently shifting supply landscape. If you’re ready to seize that competitive advantage, then don’t hesitate to get in touch with our experts today.