Future Purchasing SRM report (part 2) – making the change

In Part 1 of this series we introduced the Future Purchasing and Vantage Partners SRM (strategic supplier relationship management) report and gave an overview of why we feel it is important and valuable. Today we’ll pull out a few of the key insights contained within it.

There is so much good content in the report it is hard to know where to start. But the section on change management caught my eye, particularly one insight around internal stakeholders.

Many key business unit stakeholders saw the value of collaborative relationships with suppliers long before Procurement or Supply Chain. With this audience, the challenge was proving that the Procurement or Supply Chain organisation could be part of the solution.

So this is not the situation we’re perhaps more used to in procurement, of trying to persuade recalcitrant users to co-operate with our initiatives; this is the user saying “of course I understand the value of my key suppliers; but what are you procurement folk going to add to what I can do, and probably already do myself to some extent?”

Actually that may be a very good clue as to how to approach a new SRM programme; look for stakeholders who already understand the concept (even if they don’t call it SRM!) Then sell them on the value you can add... which of course assumes you understand what that value is.

Webb and Hughes also discuss executive engagement – getting the senior management on board, which requires alignment of the SRM programme with corporate objectives; and supplier engagement. As they say:

Before any study participant could realise results from their SRM programme, they had to demonstrate to suppliers that they were truly committed to doing business in a different way, and thereby encourage the suppliers to begin working with them more collaboratively.

And that is one of the main stumbling blocks in my experience to these programmes.  SRM is introduced; then 6 months later, there’s a bit of a crisis, and procurement are sent off to beat another 5% out of top suppliers’ prices.  Suppliers, not surprisingly, get cynical about the SRM intent at that point, and things start to fall apart.

As well as these change management discussions, there is a very strong section on processes and tools deployed by the leading firms to drive success; from segmentation to relationship governance, from scorecards to re-engineering. While there is plenty of good strategic discussion, there are also very practical comments; for instance, a chart showing 10 suggested  ‘chapters’ (and their content) for a relationship strategy document.  As we said yesterday, you would actually feel capable of starting an SRM programme, even with limited prior knowledge, if you followed the recommendations in here.

It really is an excellent piece of work; there is more genuine intellectual property provided than in pretty much any consulting firm report I can remember reading for many years.  You can download it here; and in our final post we’ll look at what the authors have to say about the perennial issue of measuring the benefits of SRM.

First Voice

  1. eSourcing Sensei:

    Great first two articles on SRM.
    I note you mention the stumbling block that you have experienced when “Procurement is challenged to squeeze out that additional 5%”.
    Well that is where an organisation I know well have been and are at. They have a great collaborative SRM programme and have seen tremendous success with the number of ideas generated in partnership with the selected supply base and the many internal organisation stakeholders.
    So when asked to achieve and additional 5% cost out they took the challenge to their SPM suppliers and worked it through collaboratively and sought to achieve this through new ideas which often involved specification rationalisation rather than attacking the supply bases already fragile profit margins.
    Okay I accept the proof of this working is the resulting 5% reduction coming out without margin impact for the supplier, but I think it is a transitional approach to negotiating cost out that may actually allow a “win win” situation to exist.

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