Benefits and Challenges of Effective Supplier Relationship Management



Buyers generally realise that they must know as much as possible about their key suppliers – products, key input materials, their suppliers, responsible personnel, production methods, quality systems, IT systems, finances and profitability, strategic plans and much more.  Only then can they appreciate what makes the supplier” tick” and be able to create a relationship truly beneficial to both parties, based on trust and long term commitment.

All successful companies in the private and public sectors seek to build strong relationships with their suppliers and business partners.  Realising that they are not isolated entities that simply purchase goods and services from individuals who happen to be able to supply them at that particular time, they recognise the need to build linkages between their organisation and the vendors that they work with by establishing strong buyer/seller relationships.  They also recognise that suppliers can directly impact on the efficiency, financial performance and profitability of their organisations.  The Gartner Group estimates that an organisation’s spend on products and services can often exceed 45% of revenue, and as spend with suppliers increases the ability of a supplier’s performance to affect your bottom line profitability increases.

Supplier-related issues, when poorly managed either internally or by the supplier, can result in degradation of supplier services, increased indirect costs, legal disputes and long term material damage to one’s business. 

Prepare an Essay which contains your research on

(a)   The importance of effective Supplier Relationship Management (SRM).

(b)   The key steps in establishing Supplier Relationship Management (SRM).

(c)   The benefits and challenges of effective Supplier Relationship Management.


This question belongs to management and discusses about supplier relationship management.

Word count: 2100


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