Supplier relationship management (SRM) is a critical component of procurement, as it helps organizations to effectively manage their relationships with suppliers and vendors to achieve better business outcomes. By building strong and collaborative supplier relationships companies can improve supplier performance, reduce costs, and increase operational efficiencies.
According to a survey by Gartner, companies that have implemented SRM programs have reported an average improvement of 14% in supplier performance. Additionally, a study by Deloitte found that organizations with strong SRM practices can achieve savings of up to 15% on their total spend.
One example of a company that has effectively leveraged SRM for procurement is Procter & Gamble. In the early 2000s, P&G implemented a supplier collaboration program, which resulted in a 20% reduction in costs and a 30% improvement in supplier performance. By working closely with suppliers to understand their capabilities and processes, P&G was able to achieve significant cost savings and improve supplier performance.
Another example is Boeing, which has a dedicated SRM team that works to build strong and collaborative supplier relationships. By regularly engaging with suppliers and encouraging collaboration and open communication, Boeing has been able to improve supplier performance, reduce costs, and increase operational efficiencies.
In addition to cost savings and improved supplier performance, SRM can also lead to increased innovation and the development of new products and services. A case study by Accenture found that by implementing a SRM program, a large consumer goods company was able to collaborate with suppliers to develop new, innovative products and services, resulting in a 20% increase in revenue.
Overall, it's clear that supplier relationship management is a critical component of procurement. By building strong, collaborative supplier relationships companies can improve supplier performance, reduce costs, increase operational efficiencies and drive innovation. To achieve this, organizations should implement dedicated SRM teams, promote open communication and collaboration with suppliers, and regularly engage with them to understand their capabilities and processes.
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