Can I be admitted without SRM?

Part 1 - Supplier Relationship Management (SRM)

Series of articles on the digitization of purchasing:

SRM in Promitea optimizes the relationship between buyers and suppliers using digital communication. The aim of SRM is to initiate and develop close and sustainable cooperation between purchasing and its suppliers for the fair benefit of all those involved along the entire value chain.

SRM does not focus on short-term effects, but develops its full effect in the long term and promotes the strategic advantages of all stakeholders. In general, the intensity of the cooperation depends on the relevance of the suppliers: more attention is paid to strategic suppliers and vice versa. Methodologically, however, thanks to the digitization of the SRM processes, there are the same approaches for all suppliers.

Promitea offers the following functions for SRM introduction and development:

1. Onboarding new suppliers

Interested suppliers register once in the Promitea portal, which is freely accessible to every supplier. This function is intended for all suppliers and is effortless for purchasing.

The registration data are specified by purchasing and are entered by the suppliers in the browser. In addition to the supplier's communication parameters, there are information on deliverable product groups and business data such as

  • Financial and personnel data (sales, EBT, number of employees, ...)
  • Certificates for the delivered goods
  • References in the market
  • other evaluation criteria specified by purchasing.
  • which are recorded by the supplier in the Promitea portal.

Promitea automatically determines the first supplier evaluation (ISQ, Innitial Supplier Qualification) from the registration data.

2. Continuous process of improvement

After the completion of the ISQ, the cyclical process of supplier qualification, evaluation and development starts.

2.1. Supplier approval

The supplier approval starts with the first assessment of the supplier qualification in classes such as

  • Strategic suppliers
  • Approved Suppliers
  • Unapproved suppliers

Depending on the ISQ, purchasing qualifies all suppliers. The rating scale can be freely set by purchasing.

Note: Experience has shown that 5-10% of suppliers are classified as strategic suppliers, 20-40% of suppliers are approved and the remaining suppliers are temporarily blocked, but remain in the list of all suppliers.

2.2. Supplier evaluation

The next SRM step is the periodic and deeper evaluation of the approved and strategic suppliers. The purchasing department sets the frequency, scope and details of evaluation as a default for each category or individual supplier.

The evaluation data is grouped into evaluation segments. Examples of the evaluation segments:

  • Financial data (total / regional sales, EBT, payment deadlines)
  • Personal data (broken down by qualification)
  • Delivery quality (scrap and return rate, post-processing costs)
  • Logistics (quantity and adherence to deadlines, EDI capability)

These are the "hard facts" that are automatically taken from the information provided by the suppliers and / or the ERP data of the purchasing organization in SRM.

In addition to the hard facts, Promitea also takes “soft facts” into account, which are largely obtained from the subjective assessments of the specialist departments. Examples:

  • Suppliers' innovative strength
  • Communication skills
  • Willingness to make individual adjustments

Purchasing sets and maintains all the necessary evaluation parameters as required. To simplify the setting and at the same time refine it, you can use the ratings

  • per product group / category
  • individually for each item of purchase

can be set.

All ratings are automatically consolidated and aggregated by weighting and standardization to form a single rating number for each supplier. The final evaluation value is between 0 and 1 (ideal) and provides the basis for the more precise qualification of all suppliers. The system of consolidation and aggregation is shown schematically in the following figure:

The suppliers are assessed annually or in shorter periods as required. Each supplier receives the result of the assessment - if agreed with him - electronically as a complete report at predetermined times.

2.3. Supplier development

The strategic suppliers and, if necessary, the approved suppliers are included in the supplier development. It basically consists of two steps:

  • Agreement of development goals
  • Definition of the measures that are agreed to achieve the goals.

The development goals are proposed by purchasing and coordinated with the suppliers. The supplier suggests suitable measures to achieve the goals.

Promitea supports supplier development through the following steps:

  • Identification of the suppliers for whom the supplier development is required
  • Electronic exchange of information between purchasing and the respective suppliers as well as documentation of the goals and measures
  • Permanent monitoring of the achievement of objectives and the implementation of the individual measures including the electronic exchange of accompanying documents and status and control information.

SRM can be used for purchasing all ABC products and all suppliers. In full for A-products that are essential for production or that are purchased in high volumes. The procurement of these products is often concentrated on a single supplier (single sourcing) or, for reasons of delivery security, on 2-3 suppliers. The cooperation with these suppliers can go as far as a joint development and open price calculation (open book), so that competitive purchasing methods are omitted or only used for control purposes.

Dr. František Bumba