| Programmes of Supplier Relationship Management (or | | | | result in a lack of motivation. SRM programmes |
| SRM) are designed to create a closer working | | | | create a shared responsibility and this fairness |
| partnership with your critical and strategic suppliers. | | | | translates into motivated suppliers who go out of |
| This should result in better value for both | | | | their way to help you. |
| organisations. However, there are mixed views as to | | | | Arguments against SRM |
| whether the benefits exceed the potential risks. | | | | Creates barriers to exit. Long-term relationships |
| Arguments for SRM | | | | with key suppliers that build dependency (for |
| Eliminates waste and barriers to effective | | | | example by investing in shared IT systems) can |
| service. Contracts set out what has been agreed | | | | create a barrier to switching suppliers. The risk is that |
| between the buyer and seller in terms of what will | | | | new entrants to the market are discouraged and you |
| be delivered and for what price. In practice waste | | | | may miss out on innovation from other suppliers. |
| can be created due to inefficiencies in how the | | | | Makes it difficult to test the market. It is |
| processes, systems and ways of working of the | | | | economically healthy to test your current prices and |
| two sides come together. A SRM programme can | | | | sourcing solutions from time to time against |
| identify these sources of waste and eliminate them, | | | | alternatives. If your SRM programme has, in effect, |
| creating lower costs and improved service. | | | | created a bespoke solution then you may not be |
| Builds mutual dependency. If both sides value the | | | | able to find a comparable alternative to test whether |
| benefits they get from the relationship created by | | | | you are still getting value for money. |
| your SRM programme then they acquire an | | | | Can result in complacency. A long-term |
| expectation that the relationship will be long-lasting. | | | | relationship with key suppliers can result in both sides |
| This means that in times of scarcity, your | | | | becoming over familiar with each other. The result of |
| organisation is unlikely to affected by any need for | | | | this can be an acceptance of the status quo ways of |
| the supplier to ration their output. | | | | working with new ideas drying up. |
| Encourages investment. If critical and strategic | | | | Need to select the right supplier first time round. |
| suppliers in your SRM programme see that it creates | | | | Obviously, if you are going to enter into a long term |
| value for them and that the business relationship is | | | | relationship with a supplier and implement SRM it is |
| likely to be a long one, then they are more likely to | | | | vitally important that you make this selection on the |
| make investments that increase their capacity and | | | | right criteria as it will become increasingly difficult to |
| capability to deliver what you need. | | | | swap suppliers if a better one emerges later. Treat |
| Motivates suppliers to go the extra mile. | | | | choosing SRM suppliers as if you were going to |
| Arms-length and adversarial supplier relationships in | | | | marry them. Easy to do but with dire consequences |
| which every problem is seen to belong to the supplier | | | | later on if the choice was wrong! |
| create disillusionment and disinterest for them and | | | | |