Spend Matters welcomes this guest article from State of Flux.
Nearly 40 people representing leading US companies from sectors as diverse as automotive, FMCG and financial services gathered in Chicago recently for the first State of Flux US SRM summit. It brought together authors of leading supplier relationship management (SRM) research and procurement officers across a wide range of industries. The even also introduced State of Flux’s sixth annual research report into global SRM practice.
What made this event a little different, especially for a US audience, was that Kellogg hosted it, and it was not a forum arranged by any of the “professional” conference and events organizers with money changing hands to sponsor and speak or to attend. As Alan Day, chairman and founder of State of Flux, explained “we really hope this event will start a dialogue and create a sense of SRM community across different sectors sharing some common challenges.”
Originally published in November, the State of Flux 2014 Global SRM Research Report looks at the current state of SRM practice of over 500 global organizations, 25% of which are US companies. The high-level themes included evidence that leading SRM companies are increasingly benefiting financially from SRM-related activities and more collaborative engagement with their key suppliers.
While US companies are well represented among the responding companies that State of Flux has identified as leaders, there is clearly a huge opportunity to do more. As US firms implement category management and strategic sourcing more effectively, they become increasingly dependent on fewer more critical suppliers and the level of risk and opportunity increases making the case for SRM more compelling.
Following a global view of current practice presented by Mel Shutes, head of SRM at State of Flux, the summit agenda moved on to looking at the approach adopted by the event’s sponsor Kellogg. Under the leadership of global CPO Shelly Van Treeck, Kellogg is focusing more on a differentiated approach based on segmentation of truly strategic suppliers.
Cathy Kutch, director responsible for supplier relations and diversity, and Adam Beuker, director of Kellogg’s global Procurement Knowledge Centre, explained how Kellogg’s SRM journey developed out of an initial focus on driving supplier performance management and is now broadly a consistent process across most of their global businesses.
John Henke, professor of marketing at Oakland University and president of Planning Perspectives Inc., was also at the event. By means of extensive research into the US automotive industry, John has set about disproving the theory that the fastest and most certain route to profitability is via traditional cost reduction. For many in the room, John’s research was potentially the “magic bullet” that could help them address the perennial challenge of making the business case for SRM at the most senior levels in their organizations. John shared his insights on the causal relationship between supplier relations and customer profit. His study quantifies the economic value of suppliers’ non-price contribution to customers – as State of Flux calls them, customer of choice benefits – and establishes that the economic contribution of suppliers’ non-price benefits are far greater than the benefit realized from supplier price concessions.
The summit attended by CPOs and heads of SRM allowed interactive discussion both between the speakers and audience and between the attendees themselves. The group was also able to discuss real world challenges and concerns and share solutions that have worked, which are backed up by solid research. People walked away with solutions to challenges or a plan on how to get to a solution.
Important takeaways included: the creation of a compelling value proposition will enable effective stakeholder engagement, recognizing SRM’s cross functional impact and treating it as a business change program rather than a procurement initiative and how procurement’s focus on category management and strategic sourcing needs to transition to lifecycle supplier management and SRM.
Alan Day, chairman and founder, shared his enthusiasm for the event being able to support companies and individuals that despite their different industry sectors are facing similar challenges and can benefit from sharing experiences and ideas. The company also plans to hold the event again next year.