Over the past few years, I have attempted to clarify some of the key terms in the procurement lexicon. Previously, we have looked at category management and supply chain risk. Now I will aim to shed some light on a tricky and frequently misunderstand topic.

Supplier Relationship Management (or SRM) came into life in 1983 when McKinsey consultant Peter Kraljic called for corporate buyers to grow more proactive in supply management.

He argued that buyers should look to understand their categories' risk and profitability impact upon a company and devise supplier management strategies that best meet this need. For instance, stationery supplies do not impact the company's profitability, nor does its absence represent a significant risk. However, should Foxconn, a major technology manufacturer, suffer a shutdown, this creates a major risk to the operations of the big-name brands it supplies, such as Apple. Indeed, so closely intertwined are Foxconn's and Apple's fates, that they are considered to have a strategic alliance.