Eskom Procurement Book 2015

SUPPLIER RELATIONSHIP MANAGEMENT

submit their proposals or bids. For the actual selection, the team may decide to use negotiation or competitive bidding, or combine the two.

5.3 SUPPLIER RELATIONSHIP MANAGEMENT (SRM) There is no universally accepted definition of SRM. It is a set of methodologies and practices needed for interacting with suppliers of products and services of varied criticality to the profitability of the enterprise [1]. It is also an advanced supply chain management means of building closer relationships with selected strategic suppliers, the purpose being to discover the added features that could enhance the relationship while improving business performance as the firms work in a network environment for mutual benefit, increasing the likelihood of creating profitable new revenues together [2]. SRM is the discipline of strategically planning for and managing all interactions with third-party organisations that supply goods and/or services to an organisation to maximise the value of those interactions [3]. Others will argue that SRM is a comprehensive approach to managing an enterprise’s interactions with the organisations that supply the goods and services it uses [4]. A common thread found in these points is that SRM is about developing a harmonious and reciprocal relationship between buyers and suppliers. The term therefore refers to the practice and processes for interacting with suppliers. Modern organisations understand how critical their business partners can be to the success of their operations. By working together synergistically, buyers and suppliers can substantially improve their business processes, while sharing information to reduce wasted time and resources to improve overall margins.

5.3.1 SRM BENEFITS

Adoption and implementation of effective SRM yields an assortment of benefits to stakeholders. The overall benefits can be uniquely high, to the extent even of eclipsing those derived from strategic sourcing. For the purposes of the current discussion, the scope of the benefits will be limited to those benefits that accrue to the supplier and to the buyer.

For the supplier, SRM:

• Facilitates the development of a reciprocal long-term relationship with the buying organisations, thereby ensuring a win-win situation between the parties. • Creates opportunities for joint investments between supplier and buying organisation. • Provides opportunity, the creation of goodwill, and a good public reputation. • Provides sufficient insight into the buying organisation’s business needs, which enables the supplier to meet those needs and ensure that the buyer’s obligations to the supplier are identified and managed.

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