The best supplier relationships build value for both parties. The worst end up in court. That’s where car rental company Hertz found itself with Accenture. It had waited three years for the global consultancy firm to build a new website and mobile apps it was happy with.
According to the lawsuit that Hertz filled in April, the project suffered repeated delays, a failure to deliver the services, failure to create a functional website or mobile app, requests for additional fees and coding issues which finally led to a loss of confidence in Accenture and ultimately termination of the contract. Hertz is suing Accenture for $32m for the fees paid between 2016 and 2018, and it wants millions of dollars more to cover the cost of fixing the problems.
Accenture, on the other hand, says the claim is without merit and has denied any wrongdoing. It also intends to assert counterclaims for non-payment of “past-due invoices”.
So, where did it all go wrong?
To start with, when suppliers and buyers fall out, it is rarely as clear cut as it appears from the outside. A range of problems are usually in play and buyers have to bear some responsibility.
How did they select Accenture? How did they assess the supplier’s ability to deliver the product and services? How did it manage the relationship with the consultancy?
All of these questions have a bearing on supplier relationship management and effective SRM can help avoid problems before they occur.
In our experience, if relationships are managed in the wrong way, relatively small issues can damage trust, meaning the supplier and buyer stop working together to solve problems, and performance deteriorates further. Then the blame game spirals out of control. For example, a supplier may be a little late with a complex stage in the project, but the buyer fails to take account late changes to the specification. It’s amazing how the two sides can often see the same issue so differently.
At State of Flux we have developed a tried and tested method for supporting SRM. It is underpinned by 11 years of global research on supplier relationship management. Since 2008, more than 5,000 contributors from around the world have taken part in our global SRM research and summits, helping us create more than 1.5 million data points. This research allows us to demonstrate the value of SRM and help clients to develop their supplier management to deliver value and reduce risks.
State of Flux advocates a six-pillar approach to SRM. These are:
Value – What are your strategic objectives? What more could you achieve with your most important suppliers?
Engagement – Is your SRM programme a business change programme? How supportive is the c-level team? How do you get buy-in?
Governance – How do you decide who is strategic to SRM? What are the best process and governance models to apply? Is contract, performance and risk management sufficiently robust?
People – Is the SRM role properly defined? Do you know what competencies and skills are required? Have you evaluated current skills and competencies and developed training?
Technology – Are you able to manage and share supplier related information? Can you extract data from other enterprise software to present a single picture of the supplier relationship? Are all aspects of SRM sufficiently enabled by technology?
Collaboration – Are you collaborating sufficiently with your strategic and most important suppliers? Are you developing joint plans that deliver the strategic objectives of both organisations?
Our structured approach to SRM can help avoid relationships ending in the nightmare scenario in which Hertz and Accenture now find themselves.
We can demonstrate the value of good supplier management and help set you up for success. But if things go wrong, it is invariably the side that has best managed the relationship that ends up on top.