State of Flux Supplier Relationship Management Report – part 1, the Overview

We mentioned the State of Flux 2012 Supplier Relationship Management (SRM) report briefly here when it was published late last year and we’ve had time now to look at it more thoroughly.

It’s a very impressive piece of work, based on responses from 286 individuals from 224 organisations on the buy side, and 138 responses from 125 companies on the sell side. It’s the fourth year State of Flux have produced the report, but the first time they’ve included direct feedback from supplier organisations on their experience of SRM, which definitely adds another dimension.

Although it is based on an extensive survey, it goes far beyond many reports we see that simply play back survey results. Instead, this one uses serious analysis of the data, plus State of Flux’s own significant experience in the field, to draw useful conclusions around good practice, issues and direction across the SRM space.

But I must confess, I came to this wondering if SRM was still the “hot topic” it has been for what seems like decades. Is it actually delivering results or is it getting a little stale?  After all, if you leave something hot in the oven for too long, it tends to go dry and lose its flavour. Is that true here?

Reading the report, I’m almost convinced the answer is “no, this is still high on the procurement agenda and deserves to be”.  But the survey findings don’t altogether convince on that front. SRM is not yet a fully accepted, integrated and operationalised process for many organisations.

On the positive side, there appears to be a slow but steady increase in some of the metrics that would indicate growing penetration of SRM good practice, with the percentage of organisations embracing SRM and embedding the principles rising slowly but steadily. On the other hand, some of the responses suggest it is still a long way from being ubiquitous . And of course with any survey like this, you have to assume that the respondents probably show a bias towards organisations who are interested in the topic anyway.

What is clear though is that the gap between the best and worst is widening – now this is a trend we believe (purely through personal observation) is taking hold in procurement generally, so it is interesting to see it confirmed here. As State of Flux put it:

“Whilst overall progress continues to be made it is clear that leaders are making more rapid and significant gains. Over half the respondents regarded as leaders are reporting significant progress against less than a fifth of followers”.

There is also evidence that the driver for SRM may be changing somewhat.

"Even though the overall proportion of respondents reporting direct cost saving benefit is slightly down, the value of the savings is up. The proportion of leaders reporting savings in excess of 8% has increased. In 2011 this was 20% but by this year the proportion has increased to 40%”.

Now fewer organisations reporting direct cost savings may be a positive or a negative sign – if more are doing SRM for other good reasons, then that’s not necessarily a bad thing. It could show more maturity of approach.  And indeed, more report that risk reduction is a key goal. However, fewer organisations report that innovation is a driver, which seems surprising.

What is unarguably good news is more clarity on the definition of SRM, and it looks like a good definition at that.

Organisations are defining SRM more clearly as a collaborative relationship with key strategic suppliers aimed at delivering new joint value. Over half of all respondents identified this as their primary focus.

On the other hand, 60% rarely or never share benefits created through SRM with the supply side. That seems disappointing – ultimately, I would have thought a true SRM programme is difficult to sustain without suppliers seeing some benefit from it too!

Anyway, get yourself a copy of this if you haven’t already – you can request a download here.  And we’ll come back in the next part of this series and take a look at what the “leaders” in SRM are doing to put themselves in that position. .

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