Businesses are starting to accept the idea of supplier relationship management (SRM) – a strategic effort to understand suppliers and treat them according to their importance to the business. Last year, State of Flux’s research found the most important business drivers for implementing SRM are cost reduction or avoidance (54%), risk management and reduction (52%) and supplier innovation (43%).
But there is more to SRM than recognising its value. To convert it into real returns for the business you need a plan. State of Flux has worked with global clients including Kellogg, Mars, Johnson & Johnson and Procter & Gamble. In the process we have gained insight into what makes SRM work: critical success factors, we call them. Beyond a vision, and an idea of value, here is our view of the critical success factors that will determine whether SRM fulfils its promise within your organisation.
1. Sufficient engagement
SRM programmes require executive-level involvement and support, not least to drive cultural change in how the organisation views and treats suppliers.
2. Committed sponsor
A committed senior executive sponsor for the SRM programme. Someone whose own success is measured, at least in part, on the success of the SRM programme. They need skin in the game, so to speak.
3. A dynamic and confident approach
Whoever is leading SRM in each department must offer a dynamic and confident approach. He or she must also be sufficiently senior and well connected to exert influence.
4. Access to senior stakeholders
The programme leader and consultant team need access to senior stakeholders and key meetings to be able to promote engagement with the programme as a solution to wider business issues.
5. Team priority and commitment
SRM meetings and workshops need to be prioritised and well attended. It is essential to keep up the required tempo.
6. Skills, capabilities and bandwidth
SRM practitioners have to have sufficient skills, capabilities and bandwidth to support the programme.
7. A compelling value proposition
Organisations need a compelling value proposition, at department and supplier level, aligned to the organisation’s strategic and business objectives.
8. Joint business plans with key suppliers
The SRM programme should result in a joint business plan with key suppliers. To build these plans, SRM teams need high levels of engagement and participation in departments to ensure they meet their objectives.
9. Suppliers’ commitment
Joint business plans require a clear commitment from both suppliers and department to achieve deliverables that improve strategic alignment, operational performance, create additional value, reduce risk and improve relationships.
10. Drive suppliers’ performance and activities
Joint business plans will define work streams for each department and supplier. Both parties need to act on them quickly to maintain momentum and accelerate value delivery.
Organisations which do not pay attention to these success factors are much more likely to see their SRM programme fail than those that do. If SRM fails, it is not just a problem for procurement teams or consultants, the organisation could increase costs and risks and miss out on valuable supplier innovation. SRM promises a great deal, but to make it work all the parties involved have to jump in with both feet.
For further information on how we can help your organisation SRM programme, please contact us at enquiries@stateofflux.co.uk.