Successful supplier management occurs when both sides work together for mutual benefit. As the best performing procurement functions know, it is not about something that’s done to suppliers, but...
Businesses are starting to accept the idea of supplier relationship management (SRM) – a strategic effort to understand suppliers and treat them according to their importance to the business. Last year, State of Flux’s research found the most important business drivers for implementing SRM are cost reduction or avoidance (54%), risk management and reduction (52%) and supplier innovation (43%).
Given the difficulty of its missions, NASA might be expected to lead in risk management. But in some cases it does not. The space agency has lost nearly $700 million after using faulty materials to build two rockets that were supposed to deliver satellites studying the Earth’s climate during 2009 and 2011.
Since most businesses depend on suppliers to help deliver their products and services, managing supplier relationships to develop new innovations, avoid risk, and reduce costs can be a key differentiator for future success. But since changing commercial relationships across a whole organisation requires a long-term commitment, can a more nimble programme generate faster returns?