Supplier Relationship Management - why should anyone care?

03 April 2018

It always struck me that we became obsessive about customer relationship management, “CRM”, (and the "fancy" systems that supposedly delivered it to us on a plate!) but never really focused enough energy and intellect on supplier relationship management, "SRM".

Supply chain experts were in demand to perform e-auctions and to assist with supplier rationalisation and all that good stuff, that shaved potentially life-saving basis points off costs, but did the Finance Function and the accounting systems do anything to proactively support supplier engagement? Too often (perhaps?) suppliers were seen as the enemy and the relationship between them and bought ledger (purchase ledger) teams were adversarial rather than collaborative.

Now we have "Prompt Payments" initiatives which are going to compel good payment behaviour and disclose-able (and auditable!) KPIs on compliance - with a range of sanctions from disbarring on government contracts to exclusions from PSLs and, candidly, too many businesses cannot comply - or be seen to comply. Supplier statements were (are?) disregarded and discarded and interactions with suppliers frowned upon as it influenced such KPIs as "processing costs per invoice". Finance Function stats on whether invoices were "held" awaiting "proof" or corrected pricing or credit notes are thin on the ground and almost impossible to retro-create after the approval point.

Many Finance Functions need to get smarter on the lost opportunities that there are to engage with the supply chain. Treating statements and credit control chasers properly and devising means of proving good practice around payments and following up on missing invoices (beyond simply ensuring completeness of costs and avoiding "stop" and collection agents' costs) is - or ought to be - a Finance Function imperative.

There is more to managing suppliers than sticking cheques in a drawer for as long as is possible but without properly designed processes and management information systems, it is at best a finger in the air. A gesture with which many suppliers over the years have become all too familiar.

For more information, contact Jim Muir (consulting@aab.uk) of the AAB Consulting Associate Network, or your usual AAB contact.

Latest Posts

Get the AAB Blog Digest