Blog

In brief

• Supplier relationship management (SRM) is the structured approach a company uses to segment, measure and develop its supplier relationships to create value and reduce risk.
• Only 6% of organizations are SRM “Leaders”, and 49% don’t know the financial benefit their program delivers (State of Flux, 2026).
• 85% of critical supply chain incidents occur at Tier 2 to Tier 4 suppliers (Sphera, 2025).
• The 4 levers: segment suppliers, share goals, measure with common KPIs, invest in people. A shared digital platform makes them scalable.
• AI in procurement only works on shared, high-quality data: just 11% of companies are ready to scale it (ProcureCon, 2026).

What is supplier relationship management (SRM)?

Supplier relationship management, or SRM, is the set of processes, tools and skills a company uses to manage its relationships with suppliers: it ranks them by strategic importance, sets shared goals, measures performance with common KPIs and works with them to improve quality, cost, innovation and supply chain resilience. Unlike transactional purchasing, SRM treats key suppliers as long-term partners.

Why is supplier management an asset few companies measure?

For a manufacturer, suppliers are more than a cost line: they are part of its production capacity, its innovation and its resilience. Yet structured supplier relationship management remains more an ambition than a practice for many companies.

State of Flux’s 2026 Global SRM Research, presented in early November and based on 387 professionals from 284 organizations, classifies only 6% of companies as “Leaders”, while 73% are still “Followers”. And almost half of respondents (49%) don’t know what financial benefit their SRM program delivers (Source: State of Flux, Global SRM Research 2026, via PharmaSource, Nov. 2026).

The message is clear: the value is there, but it needs to be made visible, measured and managed.

What are the benefits of strong supplier relationships?

Well-managed relationships mean greater operational efficiency, lower risk of disruption and privileged access to suppliers’ innovations. Neglected relationships bring the opposite: delays, disputes and hidden costs.

The link between relationship quality and results is more than intuition. In the North American automotive sector, Plante Moran’s Working Relations Index® has tracked OEM-supplier relations for 26 years and finds a correlation with OEMs’ commercial performance; in 2026, for the first time, all six automakers studied improved their scores (Source: Plante Moran, 2026 Working Relations Index, May 2026).

Where does supply risk hide?

Many companies know their direct suppliers well, but much less about the supply chain behind them. According to a Sphera study of 500 decision-makers (CPOs and CSOs), 85% of critical and risk incidents occur at Tier 2 to Tier 4 suppliers, and 70% of organizations struggle to get accurate data from those tiers (Source: Sphera, N-Tier study, April 2025).

A strong relationship with a direct supplier is also the most effective way to gain visibility into its own supply chain: trust and transparency become risk management tools.

How do you manage suppliers effectively? The 4 levers

1. Segment your suppliers Not every supplier needs the same level of attention. Ranking them by business importance, criticality and innovation potential lets you focus resources where they matter:

• strategic suppliers → close collaboration, joint plans, shared innovation;
• tactical suppliers → management focused on cost, continuity and efficiency.

2. Set clear, shared goals Specific, measurable, achievable and time-bound (SMART) goals on quality, cost, innovation, sustainability and flexibility. What makes the difference is sharing them: among the Leaders in the State of Flux research, 94% run joint planning sessions with suppliers, compared with 38% of Followers (Source: State of Flux 2026).

3. Measure and give feedback regularly KPIs on quality, on-time delivery and compliance, shared with the supplier, help you address issues early and recognize good performance. They also answer the question 49% of companies still can’t: what is our SRM actually worth?

4. Invest in people The same research identifies people as the weakest SRM pillar (average score 30%): roles, skills and training matter as much as processes and tools.

What role do technology and AI play in supplier management?

Procurement has to do more with less. For 2026, The Hackett Group expects workloads to grow by 8% while headcount and budgets shrink; AI has entered procurement’s top three priorities for the first time, and 69% of organizations access it through capabilities embedded in the platforms they already use (Source: The Hackett Group, 2026 Procurement Agenda and Key Issues, March 17, 2026).

But there is a gap between experimenting and scaling: according to the 2026 ProcureCon CPO Study, 65% of organizations are piloting AI, yet only 11% are ready to apply it across procurement, held back by fragmented systems and poor data quality (Source: GEP / ProcureCon CPO Study 2026 Outlook).

The lesson: AI works when it is built on shared, clean, up-to-date data, and the best data on supplier relationships comes from where those relationships actually happen. That calls for:

• a single collaboration platform shared by buyer and supplier, where orders, confirmations, documents and communications flow;
• real-time KPI monitoring, visible to both sides;
• predictive analytics to anticipate issues and risks.

This is IUNGO‘s approach: digitizing procurement and supply chain processes on a platform shared with suppliers, with Chiedi AIungo, the platform’s AI assistant, supporting buyers’ day-to-day work.

What changes with the CSDDD after Omnibus I?

With Directive (EU) 2026/470, the EU Corporate Sustainability Due Diligence Directive (CSDDD) has been simplified: it will apply to companies with more than 5,000 employees and €1.5 billion in turnover, with due diligence obligations from July 26, 2029, and a risk-based approach that limits information requests to smaller partners to cases where they are necessary (Source: Assolombarda, updated Feb. 26, 2026 – in Italian).

SMEs below the threshold will still be involved as suppliers to large groups: those that already have transparent relationships and well-organized data will start ahead.

Why is supplier management a strategic advantage?

Trust, transparency and shared goals turn a supplier base into an ecosystem that can respond to crises, innovate and grow together. Companies that measure, digitize and nurture these relationships today are building an advantage that is hard to copy.

Frequently asked questions about supplier management

What is the difference between purchasing and supplier relationship management? Purchasing focuses on individual transactions (requests for quotation, orders, prices). Supplier relationship management looks at the relationship over the long term: it segments suppliers, sets common goals, measures performance and develops collaboration with the most strategic partners.

How do you segment suppliers? Suppliers are ranked by business importance, supply criticality and innovation potential. Strategic suppliers require close collaboration and joint planning; tactical suppliers are managed mainly on cost, continuity and efficiency.

Which KPIs should you use to evaluate a supplier? The most common KPIs cover quality (non-conformities, returns), on-time and in-full delivery, contractual and regulatory compliance, cost and innovation capability. To be effective, KPIs should be shared with the supplier and updated regularly.

Why does supply risk extend to indirect suppliers? According to a 2025 Sphera study of 500 decision-makers, 85% of critical supply chain incidents occur at Tier 2 to Tier 4 suppliers, beyond direct suppliers. A transparent relationship with direct suppliers is the first channel for gaining visibility into these tiers.

How does artificial intelligence help with supplier management? AI supports spend analysis, contract management, market intelligence and risk prediction. According to The Hackett Group, in 2026 AI entered procurement’s top three priorities for the first time; to work, however, it needs shared, high-quality data collected on common buyer-supplier platforms.

Does the CSDDD apply to SMEs? After Omnibus I, the CSDDD applies directly only to companies with more than 5,000 employees and €1.5 billion in turnover, with obligations from July 26, 2029. SMEs may still be involved indirectly as suppliers to companies covered by the directive, especially in higher-risk sectors.

Want to see how IUNGO simplifies collaboration with your suppliers? Request a demo