How Important Is Supplier Relationship Management?


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Very important and not important at all.
It all depends on which quadrant each supplier is in the Boston Matrix.
Therefore if suppliers are in the Sole Supplier quadrant, than supplier relationship is critical.
While if suppliers are in the “Leverage” or “Shop” quadrant than competition should keep the service level meeting your requirements.
It also depends on the complexity of your own companies product. Therefore in Aviation, Military and Automotive where complex components are contracted for the life of a platform/product from a single supplier under design license than you end up with a high percentage of “Sole Suppliers” that need to be managed. If just one of these suppliers fails to deliver than the whole project or production line is placed at risk.

It also depends if you just assemble the asset and sell it, or if you own the asset for it’s full life cycle. When full life cycle ownership is required, than Total Cost of Ownership (TCO) is critical. Service Level agreements (SLA’) that control supplier behavior after installation of equipment is critical in contracts.

For example setting targets for Mean Time Between Failure (MTBF) on critical equipment will insure that your supplier understand how they should perform after the sale is completed.

At the end of the day your own company must have a clear strategy for each supplier and commodity so as to insure that the suppliers are not confused by conflicting requirements.

Than it is just a matter of specifying your required SLA’s in each contract to insure you achieve the correct supplier relationship from each supplier.

And of course if you do not actively manage the the SLA’s in the contract than they will soon be ignored 

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