How Can AI Help in Supplier Relationship Management
Supplier relationship management is an integral part of supply chain management. The probability of success for a business relies partially on the relationship you build with your key suppliers. The role of AI in SRM has been transformative, enabling businesses to maintain stronger partnerships with their suppliers.
As procurement experts, we delve into the world of artificial intelligence and how it aids in supplier relationship management to help you understand the significance of this technology and the wonders it can do for your business.
What is Supplier Relationship Management?
Supplier relationship management is the cornerstone of a robust and effective procurement strategy. The main focus of SRM is to cultivate and maintain collaborative association with suppliers. The need for supplier relationship management is to foster long-term partnerships based on value exchange and not mere transactional exchange.
As an organization your competitive edge and capabilities to do business is gauged on your ability to maintain and strengthen strategic partnerships with your supplier.
Understanding AI in Brief
We have all heard about AI or artificial intelligence, but do you really know what this technology refers to and what its capabilities are? Most of us know AI as a smart tool that provides assistance based on its own analysis. Yes, you are not wrong about that, but perhaps there’s more to AI than what meets the eye.
Artificial intelligence or AI is a much more advanced tool built with a multi-layer of complex algorithms that are capable of tracking and analyzing structured and unstructured data to deliver valuable insights. There are various subsets to AI like Machine Learning and Natural Language Processing that showcase multiple capabilities replicating human intelligence to a great extent.
Elaborating the Amalgamation of AI and Supplier Relationship Management
AI has been instrumental in optimizing and automating supplier relationship management functions. What was once a manually driven operation is now optimized with the integration of AI. By utilizing this technology, professionals can obtain curated supplier data, synchronize their supplier communications, and obtain detailed reports on supplier performance status.
“AI integration has unparalleled benefits in transforming the traditional paradigm of supplier relationship management.”
Here are some key functions that fall under the domain of supplier relationship management aided by the integration of AI.
· Supplier Performance Management
· Supplier Collaboration Efforts
· Predictive Analysis
· Supplier Ranking
· Supplier Improvement Strategies
Supplier Performance Management
Supplier performance management refers to the process of evaluating supplier performance against the pre-determined benchmark standards or KPI’s of a business.
Some of the standard indicators of performance are gauged by evaluating the speed and punctuality of delivery, the quality of services or products, and the compliance of terms stipulated in the contract.
If these three components are consistently met with great precision, the probability of maintaining a long-term partnership is enabled. Now where AI comes in; is that it makes it easier for professionals to make strategic decisions based on supplier performance insights provided by artificial intelligence.
AI tools are capable of measuring the performance by identifying various factors that show if or not the supplier is meeting high quality standards with efficiency. This dynamic evaluation of AI provides businesses a clear picture of whether a supplier’s performance aligns with the organization’s set targets.
Supplier Collaboration Efforts
AI based tools used in supplier relationship management can help improve collaborative efforts between a business and its suppliers. Critical components like exchange of information and coordination are optimized with the integration of AI.
Artificial intelligence is capable of streamlining connectivity by enabling automated communications through various channels, leading to the exchange of valuable insights related to market conditions.
The seamless exchange of information between a business and its suppliers delivered through AI, fosters collaborative efforts for improvement in services and increased adaptability to market demands.
Predictive Analysis
AI-driven SRM tools have the capability to analyze internal and external, past, and current data to identify the potential risks involved with a supplier.
With access to vast sets of data, it is possible for AI to notify businesses about the weak points of a supplier, the upcoming challenges they may face with regards to the supply of services/materials and other probable risks.
The opportunity to derive such valuable information, can help decision makers in formulating robust plans to mitigate such scenarios and keep the business running seamlessly.
Supplier Ranking
With AI’s ability to scrutinize supplier performance, you can now rank the priority of suppliers through a scoring system assigned by AI. Based on the performance indictors stipulated by your business, AI tools are capable of evaluating the performance against such standards to determine who your hero suppliers are and how you can improve your collaboration with them.
“It is essential to understand who your top suppliers are to prioritize your partnerships and strengthen you relations. This is where AI has shown remarkable assistance by easily analyzing and providing stats on top supplier performances.”
The access to such insights fosters a more focused supplier relationship management strategy to maintain strong and lucrative partnerships.
Supplier Improvement Strategies
In order to stay ahead of competition and succeed in the market, you need to be open to the idea of continued improvement. With artificial intelligence, businesses can focus on building supplier improvement strategies to maintain a long-term relationship.
Based on supplier performance and ranking, AI is capable of formulating stringent and effective improvement strategies, that can help build a reputation for your brand while also strengthening your supplier relations.
This is How AI Helps in Supplier Relationship Management
AI has accelerated a business’s ability to focus and improve supplier relations. From delivering detailed reports on supplier performance and ranking to providing strategies for improvement and predictive analytics, artificial intelligence has significantly changed the dynamics of supplier relationship management.
If you are a procurement professional looking to implement new and effective ways to improve your supplier relations, make sure to consider the advantages of AI SRM integration.
