Better manage SaaS vendors with one of these supplier management models

If your organization has prioritized improving supplier performance and management, it’s important to know where to start, what frameworks and resources are available, and how to get started. 

Today, we’ll discuss three successful models of supplier relationship management, show some real-world examples of these frameworks, and discuss the benefits of each in relation to buying SaaS software. 

What is supplier relationship management (SRM)?

Supplier relationship management is evaluating, negotiating with, and interacting with the vendors who supply your materials, services, and products. It also helps businesses conduct supplier segmentation and fine-tune the relationships with each segment to optimize outcomes for both parties.

A structured approach to supplier management can help companies streamline their communications and better manage external stakeholders in their supply chain. This cohesive approach is especially important in the post-pandemic era of supply chain disruptions and volatile materials and commodities costs.

The outcomes and benefits of successful supplier relationship management are wide-ranging. By establishing good communication with your sourcing network, you can minimize the occurrence and impact of delays, retain cost savings through market fluctuations, and optimize spend efficiency within every category. By deepening supplier relationships, you can also improve risk management and supply chain management metrics.

What is a supplier management model?

Every business interacts differently with its supplier base. The parameters of a supplier relationship may change depending on the industry or niche both parties serve, the nature of the business relationship, the volume of business, etc. 

A supplier management model is a framework that governs the interaction between your company and its vendors. These frameworks are important to maintaining the smooth operation of both businesses and maximizing the benefits of a strategic supplier relationship. Depending on the type of industry you operate in and the suppliers you contract with, one of three common supplier management models may offer the most benefit to the relationship.

3 supplier management models for procurement

1. The partnership model

The partnership model is common when both parties occupy a particular niche or industry segment. In some cases, the partnership may make sense to strengthen the partners' overall market share, develop new products through collaboration, and establish a competitive advantage within the industry. In cases where supply chain issues are prevalent, complementary companies may work together to stabilize the situation.

Partnerships sometimes involve supplier exclusivity, where both parties agree to eschew outside or third-party agreements. Supplier partnership agreements establish a mutually beneficial relationship and provide advantages over a simple and transactional relationship.

Deepening supplier relationships through partnership can often boost the prospects of both companies and offer advantages in terms of marketing, customer reach, market penetration, and profitability.

The partnership model in real life: Dell and Intel

If you’ve ever seen the famous “Intel Inside” logo on the side of a Dell computer, you’ve seen the partnership model in action. Dell partnered with the chip manufacturer to provide processing power for the majority of its desktop and laptop computers. The partnership allowed the two companies to align business processes, share information for improved product development, and align their global supply chain needs to meet customer demand for a powerful, off-the-shelf computing option.

2. The integrated model 

If your business relies on an intricate inventory management process with its key suppliers, integrated supply chain management might offer the best strategy to reduce disruption and operate on tight production schedules even in a fluid and challenging procurement landscape.

The integrative model creates a high level of communication on business needs, supply base, production forecasting, and business goals. This allows buyers and suppliers to build a strategic plan for meeting those needs on time and within budget. 

Often, this management strategy is coordinated using technology such as an e-procurement or SRM platform. This allows both parties to access supplier data and inventory levels to reduce the time to fulfillment and capacity plan using informed decision-making.

The integrated model in real life: Walmart, Pampers, and P&G

Walmart, one of the top three retailers of diapers (alongside Amazon and Target), integrated their production and SRM strategy to deliver better business outcomes for all three parties, as outlined in this case study.

“First-tier suppliers can play a key role in promoting integration by guiding and assisting lower-tier suppliers. In an example of multi-tier integration, Wal-Mart thoroughly integrated P&G's Pampers product line into its supply chain. P&G, in turn, worked with 3M to integrate its production of adhesive strips with Pampers manufacturing facilities.”

3. The strategic model

When suppliers and buyers can produce more effective business outcomes and profitability by working together, the result is often a strategic sourcing partnership. In this model, both parties benefit from mutual brand recognition and complementary business models. These arrangements may help each party capture more market share, reduce supplier risk, improve delivery timelines, or reach other initiatives that provide value on both sides. 

Strategic partners may come together through a legal agreement between the parties or through acquisition where the buyer realizes a value through ownership of its supplier, and the acquired supplier can take advantage of the parent company's reputation or resources in continuing its growth. 

The strategic model in real life: Target and Starbucks

As a major retailer competing largely on cost reduction and supply availability for its B2C consumers, Target has sought to differentiate its offering by providing value-added services and in-store experience for consumers. Many Target stores offer in-store pharmacy and grocery services to provide a one-stop shopping experience for consumers.

One component of that strategy was a partnership with coffee giant Starbucks to provide cafe services within its stores. In most Target locations, patrons can begin or end their shopping experience at a full-service Starbucks location at the front of the store. This partnership recognizes that each supplier occupies a specific role for their core demographic. (Female caregivers and homemakers that will combine a Target and Starbucks run to get what they need and enjoy some self-care). This supplier strategy makes excellent sense, reduces supply risk, and increases market share for entities. 

The best supplier management model for SaaS procurement

Depending on the relationship buyer and supplier and the mutual advantages to each, any one of the above models can help companies improve the performance management in their tech stack and create value for the organization. 

• Some supply relationships have the potential to increase market share for both parties with the correct agreement in place. For instance, reseller and affiliate agreements rely on the strength of social proof, allowing software partners to license well-known products for redistribution. Value-added resellers may provide setup and customization options.
• Companies requiring an ongoing, closely aligned experience between the organization and their supplier may benefit from an integrated model, allowing them to obtain licenses and usage credits on demand through an integrated platform.
• For businesses with complementary services that could benefit from reaching their respective target markets, the strategic model may be beneficial. One example of this is the HubSpot Partner Program. These programs offer multiple channels for partnering for growth, and building integrated services within the platform.

How Vendr can help better manage your supplier relationships

No matter your relationship with suppliers, Vendr can help deepen and solidify those ties through dynamic contract management, automated SRM process features, fair price negotiation resources, and supplier life cycle management. 

Using the Vendr platform to negotiate and automate your SaaS management creates the best possible conditions for suppliers, while minimizing risk and maximizing visibility into the apps and services your business needs to grow.