Supplier Relationship Management: How Key Suppliers Drive Competitive Advantage

As a result of further outsourcing of non-core competencies, organisations are starting to realize that they have become more reliant on suppliers in terms of innovative power, security of supply, corporate social responsibility, and on-going cost savings.

Ensuring the best prices through strategic sourcing is no longer perceived as a strategic capability of the procurement function.

Strategic partnerships are at the top of the corporate agenda of many global organisations and Supplier Relationship Management (SRM) is seen as one of the few remaining procurement topics that can still make a significant difference.

But many organisations encounter difficulties in initiating, developing and managing partnerships.

In particular, leadership and soft skills are mentioned as primary reasons for failure, alongside technical & functional competencies.

We initiated a study on SRM to gain a better understanding of the typical challenges involved and to determine how supplier capabilities drive competitive advantage.

Procurement becomes strategic
The role of the procurement function is drastically changing in today’s challenging world. In the past, procurement was expected to ensure the timely availability of products and services while also being responsible for accurately processing transactions.

Economic developments during the 1980s and 1990s prompted companies to recognize the potential contribution of procurement to meeting cost-out targets. Through the implementation of category management and running strategic sourcing initiatives, procurement was able to rationalize the supply base and consolidate volumes, resulting in price reductions.

Global sourcing and outsourcing of non-core activities became popular as well.

However, the procurement function was still functionally organised, with little collaboration and alignment with other business functions, which kept the price orientation alive.

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