Supplier relationship management is the process that defines how a company interacts with its
suppliers. As the name suggests, this is a mirror image of customer relationship management. Just as
a company needs to develop relationships with its customers, it also needs to foster relationships
with its suppliers. As in the case of customer relationship management, a company will forge close
relationships with a small subset of its suppliers, and manage arm-length relationships with others.
A Product Service Agreement (PSA) is negotiated with each key supplier that defines the terms of the
relationship. For segments of less critical suppliers, the PSA is not negotiable. Supplier relationship
management is about defining and managing these PSAs. Long-term relationships are developed with a
small core group of suppliers. The desired outcome is a win-win relationship where both parties
cf. Douglas M. Lambert and Terrance L. Pohlen, "Supply Chain Metrics," The International Journal of Logistics Management, Vol. 12, No. 1, (2001), pp. 1-19.