Supplier-Relationship-Management

Supplier Relationship Management Takes Center Stage in 2025

By Published On: January 14, 2025

Introduction

Supplier relationship management takes on an important role as 2025 kicks off. The unsettled nature of vendor relationships becomes even more tenuous as the United States transitions to a new administration focused on increasing domestic revenue production. Threats of tariffs linger over a lot of America’s immediate future and cloud existing supplier performance management tactics. It raises a lot of questions about strategic sourcing and diversification of supply bases and how quickly producers can pivot to new sources or find ways to offset increased costs.

Tariff Talk Brings Supplier Management Issues

The incoming Trump administration wants to put import tariffs on Canada, China, and Mexico to rebalance trade. While some of the initial Trump tariffs have been left in place by the Biden Administration, steeper measures are being discussed and could have a higher impact on trade. Manufacturers are poised to try and diversify while also attempting to manage their existing supplier relationships with kid gloves. Effective supplier relationship management hinges upon a delicate balance of profitability for all parties involved. These measures could be put to the test in the coming months as global economic pressures continue to rise.

How Quickly Could Traditional Suppliers Shift?

China is one of the world’s largest manufacturers. This came about after America chose to lean heavily on outsourcing to save money on labor costs. Couple that with China joining the World Trade Organization and the trade imbalance spiked. 

While the Biden Administration invested heavily in domestic manufacturing, a lot of the supplies required to create products still need to be sourced from Southeast Asia. A more robust manufacturing base centered around sustainable energy products and technology will rely heavily upon a region that the new Administration has said will receive tariffs. The question then becomes do American manufacturers find new suppliers or will they even be able to? 

This isn’t just a question with American companies. Goods sold in America could also face higher prices as suppliers around the world respond to these geopolitical whims. And it’s not like one can just snap their fingers and find an equal or better supplier

Balancing Internal and External Relationships

Supply chains rely on people and their networks. The most successful supply chains often boast the best relationships and are able to balance internal needs and obligations with external pressures and vendor relations. Supplier relationship management falls squarely into this arena, especially now. 

It can take years to develop a positive supplier relationship. Lots of transactions and negotiations take place among several different options. Once you’ve locked in price, service, and understanding, suppliers tend to stick around. It’s a mutually beneficial path and everyone profits. This delicate balance could be in flux. Supplier agreements could be renegotiated that may have taken years to develop. Risk mitigation tactics will have to be re-evaluated with new variables to consider. Cost analysis models will also be re-established.

All of this could begin via Executive Order (EO) as early as February 2025. Legislation of course takes a lot longer to matriculate but EOs can fly fast and furiously out of the White House. Challenges for supply chain officials lie in responding to the immediate and being able to prepare for long-term changes. 

Procurement and Sourcing Career Paths and Opportunities

A strong American economy coupled with heavy manufacturing investments could mean lots of supply chain hiring in the early parts of 2025. One big question remains: where will this hiring take place?

The supply chain is vast. From transportation and logistics to operations and manufacturing to inventory and demand planning to strategic sourcing and procurement. Multiply these practices across every industry – Aerospace and Defense, Chemical, Consumer Packaged Goods, Food and Beverage, Apparel, Wholesale Distribution, Consumer Electronics, and more – and a lot of lucrative opportunities could open up. If you have experience in AI and a supply chain background, you may even be able to call your own shots.

We think a likely expansion will be in the strategic sourcing and procurement world. Candidates with experience diversifying supplier lines while maintaining and developing supplier relationships should be poised for some career acceleration in 2025. 

Supplier relationship management experience will be especially in high demand as global economic policy impacts begin to shift supplier needs and affordability.

Risk Mitigation and Simplifying Supply Bases

As companies diversify their supply chains and integrate automation, the demand for skilled talent continues to grow. Agility has become a crucial trait for supply chain professionals, who must adapt to change and manage uncertainty effectively. Strategic sourcing roles are becoming increasingly vital as businesses seek to mitigate risks arising from geopolitical instability and labor shortages. The development of talent in areas such as compliance, data analytics, and advanced planning is no longer optional—it is now a critical necessity.

Automation, while offering solutions to labor shortages, introduces its own set of challenges. The implementation of robotics and artificial intelligence is creating a demand for higher-skilled roles that require technical expertise to manage and maintain these advanced systems. Organizations that prioritize training and upskilling their workforce are positioning themselves to thrive in this rapidly evolving landscape.

Rationalizing the Supply Base

The streamlining of the supply base is always at the top of a procurement professional’s agenda. Supply chain professionals still focus much on reducing the count of suppliers and third parties that exist in their chains. Businesses could become more efficient through simplified supply chains while minimizing uncertainty and risk. Having a focused supply base will create more value on each supplier relationship, thereby supporting better collaboration for development initiatives and innovation projects. However, for this optimized group of suppliers to realize its potential to be forward-thinking, and adaptable to technological leaps, and to global trends that develop their industries will be a necessity. This step will not just make it easier but also help in the tracing, supplier alliance, and, most importantly, supplier-led innovations, thus taking both companies long-term ahead for their suppliers, too.

As global economic trends continue to be disrupted, these supply base adjustments will become more prominent and the ability to adapt will be essential for success. Skillsets required to maintain these relationships and develop new ones will be paramount for success. Do not cut corners on these hires in 2025 or try to take shortcuts with your procurement and strategic sourcing talent. Engage with procurement talent specialists who have a deep understanding of the field and are ahead of the game as far as trends and insights in the global market. 

Strategies for Strengthening Supplier Relationships

Fostering robust supplier relationships involves deliberate actions, such as:

  • Regular Engagement: Schedule routine meetings to review performance, address issues, and identify collaboration opportunities.
  • Joint Problem-Solving: Collaborate to tackle challenges, reinforcing partnership and shared objectives.
  • Recognition and Incentives: Reward exceptional performance through accolades or preferred partner status.
  • Invest in Technology: Leverage SRM tools to streamline operations, monitor performance, and enhance communication.

Case Study: Success Through SRM

A major electronics company successfully implemented an SRM strategy centered on collaboration and innovation. By involving key suppliers in product development, the company shortened time-to-market by 20% and reduced production costs by 15%. This partnership also fostered technological advancements, strengthening its competitive edge.

Challenges in SRM

While SRM offers clear benefits, companies may face hurdles like:

  • Cultural Differences: Managing global suppliers requires adapting to diverse business practices and cultural norms.
  • Data Integration: Compiling data from various sources to get a comprehensive view of supplier performance can be complex.
  • Resource Constraints: Effective SRM demands time, skilled personnel, and technology, which can be limited.

Emerging Trends in SRM

The future of SRM is being shaped by key developments:

  • Digital Transformation: Technologies like artificial intelligence (AI) and blockchain are enhancing data precision, transparency, and decision-making.
  • Sustainability: Companies are increasingly prioritizing environmentally and ethically responsible sourcing.
  • Risk Management: Proactive strategies for assessing and mitigating risks are becoming central to SRM.

Conclusion

No one knows what’s going to happen in the future. If we did, we probably wouldn’t be writing this article right now. All we can do is speculate based on what people say and do. Perhaps more importantly, as business leaders, we have to do what is best for our business, which makes decisions about supplier relationships all that more important in today’s volatile supply chain. If you’re paying close attention to these relationships and maintaining them to a level of mutual profitability, that’s likely the best thing to be doing. Supply bases are fairly set for now. No one will snap their fingers and suddenly shift sourcing strategies, simply because so much has to be done in order for that to happen. It’s absolutely essential to be informed and prepared. As the old saying goes, prepare for the worst, and hope for the best. But, a lot of these relationships have been built over years and millions of dollars. Invest in your people and source talent with expertise in supplier relationship management, compliance, advanced analytics, and technology. Future-proof your company with the best people while working to maintain and adjust relationships.  If you do this, your supply chain organization should be well-positioned to thrive in the face of uncertainty.

Supplier Relationship Management is integral to modern supply chain practices, delivering benefits like risk reduction, cost savings, quality enhancement, and innovation. By focusing on critical components and adopting proven strategies, organizations can cultivate strong supplier partnerships that drive competitive success.

For additional insights into supply chain management and procurement strategies, explore these resources:

These resources can help you navigate the complexities of supplier management and advance your career in the supply chain field.