Conceptualizing Supplier Relationship Management

Purpose of the paper and literature addressed: This paper aims to conceptualize supplier relationship management (SRM). It provides an overview of the objectives of SRM from the perspective of a buying company and proposes the structure of the required capabilities of the firm to obtain these objectives. The paper aggregates the previous studies on buyer-supplier relationships and participates in the discussions on relational capabilities of a firm. Research method: Conceptual paper Research findings: Based on the extensive literature view it is proposed that the capability of SRM consists of five elements being: i) practices, ii) commitment, iii) trust, iv) communication, and v) ethics. The objectives of SRM are defined to be: i) minimization of transaction costs, ii) value creation through internal capabilities and resources, iii) gaining competitive advantage from cooperative relationships, iv) reducing the risks of supply dependence and availability, and v) diffusion of supplier information between business units. The firms with organizational capability to manage supplier relationships are committed to develop their supplier relationships in a collaborative way, have ability to coordinate their supply chains effectively, aim to trustful relations, communicate actively with their suppliers, and follow valid supply processes. Antecedents of capability are experience and learning. Objectives need to be aligned with the firm’s strategy and effective control mechanisms has to be created in order to foster interaction with firm’s external resources and achieve relational performance. These elements form the foundation of SRM. Main contribution: The paper strengthens the insights of the strategic role of supplier relationship management in global business and reinforces the theoretical foundations of supplier management. Moreover, a conceptual model of SRM is proposed for further research.