An Entrepreneurial Take on Supplier Relationship Management: Best Practices (Part 3)

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When was the last time you stayed in an Airbnb? What about a hotel?

Your answers to those questions will depend in large part on your age, of course. Younger travelers are more likely to go for the lower prices of Airbnb lodging (if gambling a bit on the experience of the actual stay). Many people love Airbnb, and many people hate it, but most would probably agree that the company has upended the vacation lodging business.

Same thing with the ride-share companies Uber and Lyft. Love them or hate them, their names are becoming synonymous with “taxi” in the same way that, among younger crowds, you’d hear “book an Airbnb” more often than “book a hotel.”

Forward-thinking executives are reacting to this faster rate of change by challenging their teams to be more entrepreneurial. This concept, as applied to procurement, lies at the heart of the latest State of Flux report on supplier relationship management (SRM).

Spend Matters has been covering this report in a series of posts. Part 1 gave an introduction to SRM, defining what it is and isn’t, and Part 2 looked at how procurement organizations are generally doing in this area. Today’s post will focus on how procurement can apply an entrepreneurial mindset to SRM.

There is perhaps no industry that is immune to technology-enabled disruption. Successful procurement leaders, State of Flux argues, will need to become entrepreneurs. Below, we’ll look at a number of best practices that can be distilled from the report.

It’s All About People

As the report put it, “People are the center of SRM. Their skills, and the relationships they can form and maintain, will be the crucial factor in ensuring that the value, governance and engagement pillars of SRM benefit the organization.”

Unsurprisingly, organizations that are advanced in SRM create dedicated roles. Some even have SRM roles that are dedicated to a single supplier relationship.

In addition, SRM leaders are more likely to have completed skills and competency frameworks and assessments for this area, as well as offer their employees training.

If you want to improve your SRM efforts, but you’re not quite ready to create dedicated roles, consider focusing on improving the following skills. Not only did State of Flux’s survey respondents rank them highest in importance for SRM, these were also areas where the respondents deemed themselves in need of improving:

  • Communication
  • Strategic thinking
  • Influencing skills
  • Commercial and contractual expertise
  • Cross-functional working

Engage, Engage, Engage

Source: State of Flux

Having the support of senior management is crucial, and as you can see from the chart above, organizations that are leaders in SRM are more likely to have support from above.

It’s easier said than done. In fact, State of Flux reveals a downtrend in companies reporting active engagement with senior management: from 20% in 2016 to 13% this year.

But it’s not just about the C-Suite. Engagement with suppliers is another crucial SRM best practice. In the report authors’ words, “phone calls, emails and face-to-face exchanges between the vendor and the business are the substance of supplier relationships.”

Thirty-seven percent of SRM leaders reported that they have a strong and active level of engagement and support from their key suppliers. This is three to six times the rate for the other respondents, depending on the maturity of their SRM programs. Non-leaders in SRM are also much more likely to experience opposition from their key suppliers.

It is also vital to try to see your company through the eyes of your suppliers. Do they view you as a customer of choice? SRM leaders are more likely to solicit structured feedback from suppliers, a gesture that in itself demonstrates a willingness to collaborate.

Check out the full report for yourself here.

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