Organisations can no longer operate in isolation, if indeed they ever could. Your customers ultimately depend on the excellence of your suppliers because if they fail, you fail. Top organisations create superb supplier alliances to ensure that their customers receive a valued benefit and continue to use them. The question is who should be your alliance partners?

Even with initiatives such as supplier base consolidation, large organisations in particular typically will still have several thousand suppliers. Obviously, you can’t form alliances with all of them. You will need to segment your suppliers in order to identify the ‘critical few’ that merit some form of alliance or partnership working.

Even without this kind of analysis, some suppliers will immediately stand out as worthy of some kind of closer working relationship. These include:-

• Suppliers to whom you have outsourced part of your organisation 
• Joint ventures in which you share assets and resources to create value 
• Critical services or materials without which your organisation cannot function.

The implications of poor performance from these types of supplier can be devastating. One aim of supplier relationship management (SRM) is to ensure that this does not happen.

The next question you need to answer is whether as an organisation you are ready for SRM. There are a number of factors that you need to consider. These include:-

• The availability of senior members of staff who are willing to be sponsors of your key supplier relationships. The issue here is that sponsors are needed not only to drive the pace of the SRM programme and ensure a quality output but may be needed to unblock barriers to you achieving your SRM objectives.

• The perception and reality of the value that your SRM suppliers are currently delivering. If there is widespread agreement that they are not translating their capability into effective delivery and value for money then you are more likely to get support for your programme.

• The maturity of your organisation in terms of its approach to problem solving. SRM is largely about identifying and solving problems and this is made easier if there is already a culture of continuous improvement in your organisation supported by appropriate processes and toolkits

• The strength of procurement leadership in your organisation. If there is a central group of high calibre people who are well connected to and supported by local procurement people within the business units of your organisation then SRM becomes easier to drive and coordinate.