Supplier Relationship Management (SRM)

Supplier Relationship Management

SRM in Promitea optimises the relationship between the purchasing department and suppliers through digital communication. The goal of SRM is to initiate and develop close and lasting cooperation between purchasing and suppliers that benefits both parties.

SRM does not prioritise the short-term effect, but instead develops relationships for the long-term and promotes strategic benefits for all parties involved. In general, the intensity of cooperation is governed by the relevance of suppliers: strategic suppliers are given more attention and vice versa. However, thanks to the digitisation of SRM processes, the same approach is applied to all categories of suppliers.

Promitea offers the following features to implement and develop SRM:

1.Registration of new suppliers
Interested suppliers register once on the Promitea portal, which is freely accessible to them. This function is available to all suppliers and represents a negligible cost for purchasing.

The required registration data is specified by the purchase and is filled in by the supplier in the browser. In addition to basic supplier data, this includes information related to the assigned item group and business data such as

• financial and personnel data (turnover, profit before tax, number of employees)
• certificates for the goods supplied
• market references
• other, purchase-determined evaluation criteria market preferences

Promitea automatically creates an Initial Supplier Qualification (ISQ) from the registration data.

2. Continuous quality and delivery reliability improvement process
Once the ISQ is closed, a cyclical process of qualifying, evaluating and developing suppliers is initiated.

2.1. Approval of suppliers
Supplier approval is initiated by assigning suppliers to groups, for example:

• strategic suppliers
• approved suppliers
• unapproved suppliers

Using ISQ, Purchasing qualifies all suppliers. The evaluation scale is freely adjustable.

Notice:

Based on experience, about 5-10% of suppliers are included in the strategic supplier group, 20-40% are approved and the rest are provisionally blocked but remain on the all suppliers list.

2.2. Permanent evaluation of suppliers
The next step of SRM is a periodic and more detailed evaluation of approved and strategic suppliers. The frequency, scope and details of the evaluation shall be specified by the Procurement Department individually or jointly, e.g. for suppliers of the same category.

The evaluation data is divided into evaluation segments. Examples of evaluation segments

• financial data (total/regional turnover, profit before tax, invoices due, ...)
• personal data (broken down by qualification)
• quality of delivery (rate of defective goods and their return, repair costs)
• logistics (meeting deadlines and quantities, ability to exchange data electronically - EDI)

These are "hard facts" that are automatically transferred to SRM from information provided by suppliers (financial data) or from the ERP data of the purchasing organization (quality, logistics).

In addition to these quantifiable data, Promitea also takes into account "soft facts", which are mainly obtained from subjective evaluations of specialized departments of the purchasing organizatio

Examples:

• innovativeness of suppliers
• communication skills
• readiness for individual adjustments

All required evaluation parameters are set by the purchase according to its needs and further managed.

The evaluation can be set for:

• group of items/categories
• each purchased item individually

All evaluations are automatically converted into one evaluation number for each supplier according to the weighting. The final value lies between 0 and 1 (1 being the ideal rating) and is the basis for more accurate qualification of suppliers. The consolidation system is illustrated in the following diagram:

Suppliers are evaluated annually or at shorter intervals as needed. The results of the evaluation shall be sent to each supplier - if agreed with the supplier - as an electronic report at a predetermined date.

2.3. Developing relationships with suppliers
Strategic suppliers and, as appropriate, approved suppliers are usually included in the development of supplier relationships.

Development objectives are proposed by Purchasing and agreed with suppliers. The supplier shall propose appropriate measures to achieve the objectives and agree them with purchasing.

Promitea supports the development of supplier relationships by:

• Identification of suppliers who are desirable for developing supplier relationships.
• electronic exchange of information between purchasing and the relevant supplier, documentation of targets and the steps taken to achieve them.
• permanent monitoring of the achievement of objectives and the implementation of individual targets, including the electronic exchange of supporting documents and information on status and management.

SRM can be used to purchase all types of items (A, B, C) and for all suppliers. In full for type A items that are essential for production or are purchased in large volumes. It is often the case that the purchase of these items is directed to a single supplier (single sourcing) or, for reasons of security of supply, to 2-3 suppliers. By cooperating with these suppliers, relationships can be developed and open book pricing can occur so that competing purchasing methods are eliminated.