Supplier Relationship Management Software: The Best Tools & Strategies

According to Gartner, 88% of procurement leaders have significantly increased their focus on supplier collaboration over the past 24 months. So, how can companies strengthen their supplier relationship management and see real improvements in practice?

In this article, we explore what SRM software is and discuss proven strategies for efficient partnerships with suppliers. Moreover, we offer recommendations for the five best supplier relationship management software solutions to help companies on this journey.

Keep reading to learn:

• What is supplier relationship management?
• Goals and benefits of supplier relationship management automation
• Best supplier relationship management software
• How to efficiently choose and integrate supplier relationship management software
• Frequently Asked Questions

What is supplier relationship management?

Supplier relationship management (SRM) is a strategic approach to building a network of vendors and suppliers. It helps organizations foster long-term, mutually beneficial partnerships with their key vendors. Rather than focusing on short-term results, SRM emphasizes deeper collaboration and value creation over time.

In the context of procurement and supply chain management, “supplier relationship management” and “supplier management” are often used interchangeably, but they do have distinct meanings. SRM focuses on strategic tasks and involves activities like performance monitoring, joint development initiatives, and ongoing engagement to ensure both parties are aligned in their goals.

On the other hand, supplier management is a broader term that also encompasses operational tasks, such as supplier selection, onboarding, and risk management. While these aspects may not fall directly under supplier relationship management, integrating them into your SRM strategy is highly beneficial.

For this reason, the most effective supplier relationship management (SRM) software supports companies throughout the entire supplier lifecycle, including:

• Supplier selection (often through the request-for-proposal (RFP) process)
• Negotiation and contracting
• Supplier onboarding
• Managing ongoing communication
• Supplier performance evaluation
• Risk management
• Renewal or renegotiation

While the operational tasks are more straightforward, the strategic aspect of supplier relationship management can seem more abstract. How exactly can companies effectively build strong relationships with suppliers after successfully completing the negotiation stage? Well, this journey involves several steps:

1. Segmenting the supplier base.
Depending on your company’s industry focus, vendors can be categorized based on different criteria, such as item types, purchase volumes, potential risks, locations, prices, and sustainability. You could also segment suppliers based on the Kraljic Matrix, which focuses on profit impact and supply risk.

2. Crafting tailored strategies for different supplier segments.
Start with identifying specific goals for each supplier segment, for instance cost reduction, quality improvement, or innovation. Then, choose the appropriate communication style and frequency. For suppliers in a high-risk segment, consider more frequent check-ins to address issues proactively. Plus, for them, you could also develop additional strategies to mitigate risks, such as diversifying your supplier base or creating contingency plans. It’s also helpful to establish clear performance metrics (KPIs) tailored to each segment of suppliers. These KPIs can be related to delivery time, quality standards, or cost efficiency.

3. Building a deeper connection with suppliers.
Focus on transparent two-way communication with suppliers to ensure timely exchange of information about increases in order volume, potential shortages, and price changes. Essentially, this level of communication ensures that the suppliers know your business and are attuned to its needs. Another great way to deepen relationships with suppliers is to conduct surveys, which help understand and improve supplier satisfaction levels.

4. Continuously monitoring supplier performance.
While assessing supplier performance, focus on delivery timeliness and accuracy, product quality, cost efficiency, lead time, and responsiveness. Performance data feeds back into the SRM cycle, influencing the next round of segmentation and strategy development. In short, it creates a loop that gets stronger each time.

Goals and benefits of supplier relationship management automation

When a company prioritizes strategic supplier relationship management, it can unlock significant opportunities to safeguard its supply chain and achieve savings. Research suggests that 75% of budgeted sourcing savings can disappear within 18 months without a reliable supplier management process.

However, building strong supplier relationships requires significant time and effort. Of course, it’s possible to update all the supplier data, store procurement contracts, and track performance manually in spreadsheets, but doing so can be incredibly frustrating and inefficient.

Firstly, relying on spreadsheets increases the risk of human error. A simple typo or misplaced decimal can result in incorrect pricing, delivery schedules, or inventory levels, causing disruptions that could have easily been avoided. Moreover, as your supplier network grows, spreadsheets quickly become unwieldy.

Secondly, sifting through various sheets to track communication threads, performance metrics, and compliance documents can feel like a daunting, never-ending task. This complexity can lead to missed opportunities for collaboration and improvements, as valuable insights may get lost in the chaos of numerous files.

However, when companies decide they’re ready to use supplier relationship management software for greater visibility and convenience, they can achieve the following benefits.

Reduced supplier risk

Well-established supplier relationship management allows companies to be proactive about potential risks and supply chain disruptions. The first step is to develop better risk awareness by analyzing key factors such as suppliers’ locations, growth stages, and adherence to industry regulations and standards.

Supplier relationship management software provides real-time visibility into supplier performance and allows companies to accurately monitor delivery timelines, quality issues, and compliance. This means that if a supplier begins to show signs of decline — like delayed shipments or increased error rates — a purchasing company can notice it in time and respond appropriately.

Unlocked savings and negotiation leverage

The best SRM software provides companies with a clear overview of where their money goes, and this visibility can be used to drive cost reduction or cost savings. For example, if you notice that your company buys similar products from multiple vendors, you can commit to higher purchase volumes from a single supplier. This is a great opportunity to negotiate volume discounts.

Another powerful way to negotiate discounts is to gain insights from tracking spending per supplier. When you use supplier relationship management software to track exactly which suppliers receive the largest share of your business, you can leverage that purchasing volume to request better terms or pricing.

Additionally, many suppliers offer discounts for early payments, but these opportunities are easy to miss when tracking payment deadlines manually. Supplier relationship management software can show real-time invoice statuses and deadlines so that the accounts payable team can optimize payment schedules accordingly.

Accelerated operations

Implementing a supplier relationship management software tool lifts the administrative burden associated with managing suppliers. For instance, automating invoice processing and purchase order management can eliminate manual data entry errors and accelerate approvals. Imagine the relief of freeing up your team’s time from tedious paperwork and hours spent eliminating errors.

Additionally, instead of manually tracking contract renewal dates in spreadsheets, a procurement team can receive automatic notifications from the supplier relationship management software when a contract is due for renegotiation. This ensures that companies never overlook opportunities for negotiating better terms.

Improved supplier responsiveness

SRM software enhances communication and responsiveness between companies and their suppliers. By implementing a supplier relationship management software tool like Precoro, companies can use the Supplier Portal to quickly address issues such as delivery delays or quality concerns. Moreover, they can also instantly send purchase orders, receive invoices, and enable suppliers to edit their product catalogs or monitor the payment statuses.

Plus, some supplier relationship management solutions enable companies to add notes, comments, and attachments to provide important information to vendors. In general, if a supplier knows they can easily reach out for clarification on specifications, they’re more likely to respond promptly, reducing lead times. This immediacy fosters a culture of collaboration where suppliers feel valued and engaged, leading to smoother operations and greater trust.

Best supplier relationship management software

Now that we’ve discussed what the SRM software’s value is, let’s try to find the right fit for your company. We’ve put together a list of the best SRM software examples, each suitable for different business needs and growth stages.

Precoro

Precoro is an automated system for procurement centralization that comes with an advanced module for supplier management and even offers a Supplier Portal. Users can streamline every aspect of supplier relationship management with this SRM solution:

• Find the best supplier offers through the RFP process.
• Create tailored supplier registration forms for every type of supplier.
• Set up approval workflows for new vendors based on supplier categories.
• Store and automatically capture information from important docs provided by suppliers, such as W9s, SOC2 reports, and tax certificates.
• Ensure that purchase orders (POs) align with specific contracts for compliant purchasing.
• Create supplier and item catalogs and encourage requesters to choose between pre-approved options.
• Track supplier performance.
• Analyze spending per supplier to gain negotiation leverage.
• Store procurement agreements with automatic reminders before expiration dates.
• Give suppliers access to the Supplier Portal, where they can receive POs, send invoices, update product catalogs, and track payment statuses.

Best suited for: Medium to large enterprises that prioritize easy SRM software implementation and look for supplier management capabilities as part of the overall procurement centralization.

SAP Ariba Supplier Management

SAP Ariba Supplier Management is a portfolio of solutions for managing supplier information, lifecycle, performance, compliance, and risk. It enables users to:

• Onboard new vendors.
• Have a comprehensive overview of important supplier information.
• Manage suppliers based on specific parameters.
• Ensure compliant spending.
• Monitor contract lifecycle.
• Automate payables workflows.

While SAP Ariba offers comprehensive tools for supplier relationship management and procurement, this SRM software has a steep learning curve that is not suitable for non-tech-savvy users. In addition, it offers complex functionality that may be excessive for small and midsize businesses.

Best suited for: Large corporations that are ready for lengthy implementation and need a complex set of functions to manage their supply chains.

Oracle Supplier Management

This supplier relationship management software includes Supplier Lifecycle Management and Supplier Hub. Together, they enable teams to:

• Create and manage customized questionnaires and approval workflows.
• Centralize supplier data.
• Identify and manage supplier risks through detailed risk assessments
• Categorize suppliers.
• Evaluate supplier performance.

Plus, Oracle SLM is integrated with Oracle’s broader set of applications, including ERP and supply chain management systems.

Best suited for: Large industrial companies that manage a complex network of suppliers.

Gatekeeper

Gatekeeper is a cloud-based supplier and contract management platform which can help companies to:

• Use customizable workflows and forms that gather essential supplier information.
• Approve vendors.
• Track and assess supplier performance using configurable KPIs.
• Enable suppliers to self-manage their profiles and submit documentation via the Vendor Portal.
• Store contracts.
• Segment suppliers.

Best suited for: Fast-growing companies from highly regulated industries.

AdaptOne

AdaptOne is a cloud-based SRM software example that is easy to use and offers the capabilities to:

• Easily reach and engage with diverse suppliers.
• Onboard vendors.
• Manage supplier certificates.
• Control compliance and mitigate risks.
• Set up and control your spending goals.
• Provide vendors with access to the Supplier Portal so they can actively manage and update their information.

Best suited for: Businesses that need a flexible tool for basic supplier relationship management.

How to efficiently choose and integrate supplier relationship management software

Choosing the right supplier relationship management (SRM) software can transform the way your company handles suppliers and approaches cost savings. This is relevant across various industries, whether it's a construction business, renewable energy sector, hospitality, healthcare or other industries.

However, selecting a supplier relationship management software tool that’s unfit for your business needs can lead to costly setbacks. Here’s a step-by-step guide through the selection process:

1. Define your requirements

Before beginning the search for the best supplier relationship management software for your company, it’s important to clarify your needs and expectations. This means identifying your main challenges and goals and involving the right people in the decision-making process. Additionally, by prioritizing strategic suppliers, you can ensure your efforts are focused where they matter most.

• Identify key pain points and objectives
  What specific issues are you facing with the manual supplier management process or with your current tool? Whether it’s poor supplier collaboration, difficulty tracking performance, untimely contract renewals, or missed invoice payment deadlines, clearly define your most pressing pain points.

• Set clear goals for supplier relationship management
  Once you’ve recognized what’s missing or underdeveloped, decide the goals for the new approach and automation. Your focus may be on improving supplier collaboration, gaining better visibility into spending, or reducing supply chain risks. This step will help you determine the necessary features for the supplier relationship management software. For instance, if you aim to minimize disruptions, you might need risk management features. And if you mainly need to provide suppliers with better visibility, consider an SRM solution with a supplier portal.

• Engage relevant stakeholders
  Supplier management impacts multiple teams. To gather cross-departmental input, involve procurement, finance, legal, and operations. For example, the finance team might prioritize integration with invoicing systems, while legal may focus on contract management features.

• Prioritize strategic suppliers
  Start implementing the SRM software with your most critical suppliers — those that directly impact your core business or supply chain. Strategic suppliers typically warrant more attention in a supplier relationship management solution than occasional vendors.

2. Decide what features you need

You’re the expert on specific features your supplier relationship management process requires. However, it might be a good idea to consider some practices you haven’t employed before in order to not overlook additional factors that can greatly enhance the success of your supplier relationship management software tool. Here are a few key areas to consider beyond the basic supplier management features.

• Security and compliance
  Protecting your data is paramount, especially when dealing with sensitive supplier and financial information. Ensure the SRM software has robust security features, such as data encryption and regular security audits, to keep your data safe. It’s also critical to check compliance with industry regulations, such as GDPR, SOC 2, CCPA, or HIPAA.

• Integration with existing systems
  A SRM solution should integrate with your current ERP or accounting tools. This ensures smooth data flow across platforms and prevents information silos. If your systems have an automatic data transfer set up, you can better manage purchase orders, payments, and supplier invoices without duplicating data entry.

• PunchOut catalogs
  If you’re dealing with suppliers that offer PunchOut catalogs, your supplier relationship management software should support this feature. PunchOut catalogs let your employees browse and purchase items directly from a supplier’s system while keeping everything compliant with your company’s policies.

• Scalability
  The best SRM software should offer scalability potential. Whether you’re expanding into new markets or working with more suppliers, your supplier relationship management solution should scale without requiring a complete overhaul. Ask SRM software providers how their systems handle growth in supplier numbers or additional functionality as your needs evolve.

• Reliable customer support
  Strong customer support is crucial, especially during the initial setup when data migration and onboarding can be complex. Look for the best SRM software vendors that offer hands-on assistance to guide you through data transfers and ensure that your team is trained to use the software effectively. Ongoing support for troubleshooting and updates is equally important to keep things running smoothly.

3. Conduct thorough research

Once your requirements are clear, dive into research. Industry reports, user reviews, and peer recommendations can provide valuable insights into which SRM solutions are most effective and trusted. Doing your homework here ensures you select the best supplier relationship management software that aligns with your needs.

• Consult industry reports and analyst reviews
  Some of the best sources to learn about top supplier relationship management software are Gartner or Forrester. Their reports provide insights into leading software providers and their strengths or weaknesses.

• Leverage user reviews
  Check platforms like Capterra or G2 for detailed reviews from real users. Look for feedback on usability, customer support, and scalability. It’s also valuable to note recurring pain points.

• Network with industry peers
  Ask colleagues or peers in your industry about their experiences with supplier relationship management software tools. This real-world feedback from similar organizations can help you avoid costly mistakes others have faced.

• Ask for social proof
  After narrowing down your search for supplier relationship management software on Gartner, as well as by reviewing websites and insights from similar companies, move forward with your evaluation. Review case studies of SRM software providers to see how they’ve helped similar businesses overcome challenges. Moreover, you could also ask those selected vendors to put you in touch with their existing clients of the same company size or industry and get their firsthand feedback.

4. Plan for successful implementation

Even the best supplier relationship management software won’t help if it’s not implemented correctly. Set a clear timeline, train your team, and ensure proper monitoring after going live. A thoughtful approach to implementation paves the way for efficiency later on.

• Set a clear timeline and milestones
  Create a project plan for the SRM software rollout, including key milestones for training, testing, and full adoption. Communicate closely with the software vendor’s customer support team to determine possible hiccups and learn best practices for a smooth implementation.

• Train and engage your team
  Organize comprehensive training sessions to ensure all relevant employees understand how to use the software effectively. Some SRM software providers can help with tutorials and team training.

• Monitor and optimize post-implementation
  After the supplier relationship management solution goes live, continue monitoring its performance and seek feedback from users. Make adjustments as necessary and take advantage of customer support when issues arise.

Frequently Asked Questions

Make informed choices for supplier relationship management software

By effectively managing supplier management relationships, businesses can improve product quality, streamline processes, reduce costs, and increase overall efficiency. But to achieve this, it’s important to choose the right tool. There are many supplier relationship management solutions on the market, each with a different value proposition and set of features.

A good way to start your search is to check out supplier relationship management software on Gartner, Crozdesk, G2, Capterra, and other sites, where you can find analyses of SRM software examples and users’ feedback. Answer these questions when making the decision:

• Does the system have the needed features for your ideal supplier relationship process?
• What are the reviews of the tool’s user-friendliness and customer support?
• Does the software provider offer support with data transfer, onboarding, and training?
• Is the supplier relationship management software scalable to accommodate your future growth?
• Can it integrate with your preferred tools?
• What are the system’s security capabilities, and are they backed up by certificates?

In the end, the best SRM software is the one that covers your needs. If you want to see whether the Precoro is the right fit, don’t hesitate to contact us.