What means Supplier Relationship Management (SRM)?

The term Supplier Relationship Management (SRM) includes the strategic and operative processes, beginning with the purchasing strategy, supplier management and procurement controlling all the way to the tendering and contractual process as well as the operative requirement request and ordering processes.

The objective of an SRM system is to create a close link for all suppliers to the company. At the strategic SRM level, the material or product groups of the purchasing department are considered and planned and managed by lead buyers. By means of semi-automatic or web-based tendering processes, the strategic purchasing department communicates with the suppliers. The arrangement for price negotiations is processed, for example, either manually or web-based.

The initiation through to the agreement or contract can be realized through e-Collaboration (electronic cooperation), Contract Management or through e-RFX and e-Auction.

The functional areas of the supplier management system, such as supplier segmentation, are also at the strategic supplier relationship management level. This way it is possible to define, for example, the segmentation of suppliers using a traditional ABC analysis in the SRM system.

Performance management in the purchasing department (Procurement Controlling) also belongs to the “strategic” part of the SRM generic concept

The operative purchasing, or procurement process, level is also depicted n the SRM. At this level, a demand is processed in the material group of the company. The assessment of demand can be categorized into direct and indirect material and services. Sub-processes or parameters in material procurement include, for example, stock procurement, individual procurement or production-synchronous procurement (just-in-time – JIT). Indirect materials or services (e.g. in marketing or IT) are concluded via catalog processes, user-defined text procurement or the procurement of capital goods.

Once the assessment of demand is complete, the order is released via e-Procurement systems or directly in the ERP system. With modern supplier relationship management implementations, the goal is to ensure a direct, fast and transparent exchange of information between the corporation and the suppliers. The objective here is cost reductions in particular, as well as an efficient and effective process flow that results in a reduction of process costs is.

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