Massive improvements in cost and service come from an effective supplier relationship management (SRM) programme. There are five components of a successful supplier relationship management programme. These are best thought of as the “who”, “why”, “how”, “with what” and “when” questions. Answer these correctly and the success of your SRM programme is assured.

The SRM process starts with selecting the right partners - the “who”. This is key to the success of your programme - a supplier may be key to you but are you to them? Unless both parties see the other as a strategic partner the programme will probably fail.

You can use supply positioning and supplier preferencing approaches to select the right supplier. Supply positioning is the result of segmenting your purchase categories based on the importance to your organisation and the degree of supply risk.

Categories that are high in importance and have high supply risk are your strategic categories. Equally, supplier preferencing summarises their approach to the categories they sell, based on the importance of the market and the importance of your account. Categories that are in important markets and have you as an important account are strategic to them.

When the category is strategic to both the buyer and supplier you have the basis of a successful SRM programme.

The “why” of the process is the business case that shows how SRM can deliver value and help both sides to grow. It should cover the purpose of the relationship, its mission and its objectives.

Selecting partners for SRM and agreeing the “why” of the relationship is something that you do at the start of the process and revisit annually.

The “how” of the SRM process is where you determine the specific initiatives that you and the supplier will do jointly in order to deliver value. This requires a process that proactively fills a pipeline of initiatives that help to meet the goals of each organisation and so can demonstrate the value they add.

The “with what and when” covers roles and responsibilities for delivering the improvement initiatives, project and programme management.

The “how” and “with what” sections of the process will fill and maintain a pipeline of possible initiatives. These are taken forward as business cases to your SRM Sponsors for review and agreement. A successful SRM programme will always develop more improvement ideas than you have resources to implement.