Supplier Relationship Management – what I Learnt from Painful Experience

Hot TopicOur hot topic this month is Supplier Relationship Management and Innovation.

Before we get into all the positives, I thought it was worth drawing on my personal experience as a CPO and consultant to highlight a few of the bear traps in terms of implementing SRM programmes. You may detect a note of frustration here; my personal track record of introducing SRM programmes would not be something to boast about to the head-hunters, to be perfectly honest.  I’d like to think perhaps I was an early adopter, ahead of the curve, or that’s my excuse in any case! Anyway, here are some learnings from those various experiences.

  1. You can’t do SRM properly if you haven’t got robust contract management in place

If you are not at least competent – and preferably a bit more than that – in contract management processes and capability, then don’t even think about a serious SRM programme. By competent, I mean having a clear understanding of spend, appropriate performance measures with suppliers, tracking and feedback of performance, structured contract management meetings and relationships, and the right contract administration in place. If you don’t have this, any SRM programme will be built on sand, not mentioning any names from my past life (NatWest). If you don’t know whether the supplier is basically doing a good job, across your organisation, how can you talk to them sensibly about strategic relationships, development, and innovation?

 

  1. Be really clear about the purpose of the SRM programme

Why are you doing this? It must be in order to capture or generate value for your organisation that you cannot get without the SRM programme. That might be genuine innovation, or very close working with suppliers to re-engineer processes to cut costs, or generating a more positive relationship so that you get “preferred customer” status from the supplier. But you need to be clear as to why you’re investing in SRM. Otherwise (and yes, this is from personal experience again), it will become simply a good excuse for top management from both parties to have a nice lunch, game of golf, or even sailing trip once every six months. They may discuss the “relationship” but nothing will actually happen.

 

  1. Get internal stakeholder buy-in to and involvement in the programme

I remember one case where part of the buying organisation was trying to develop a strategic relationship with this “key supplier”, whilst another part was desperately trying to find an alternative supplier, so they could kick out what they saw as a bunch of incompetent idiots! Now you might never get every internal stakeholder lined up with the same view, but you need to understand those internal dynamics and engage widely amongst stakeholders if SRM is going to work. Going back to the previous comment, participants must understand the purpose of the work, and it cannot just be a procurement-centric  programme if it is going to generate real value.

 

There is more – we could get into issues of data, the skills needed in SRM (often not the traditional procurement skills), success measures, choosing which suppliers to work with and many other factors. I’m sure some of those will come up through the month. But the three factors above certainly need to be carefully considered if you’re going to make SRM work, and I have the bruises to prove it ...

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