Supplier Relationship Management: Cost, Risk, and Value (Part 3)

In supplier relationship management (SRM) areas showing moderate or significant progress according to State of Flux's 2012 survey, groundwork-type or foundational elements dominate the top five areas. In addition, "internal stakeholder alignment" (78% of respondents voted this a top area), quality of relationships (75%), process (75%), senior executive buy-in (72%) and trust and collaboration (70%) round out this top five list. Three of these areas, with the exception arguably over measuring and managing "quality of relationships" and "trust and collaboration," are really about getting the internal vendor management house in order versus progressing toward more advanced activities.

It is in the "bottom 5 areas of progress – minimal or none" where a number of these more advanced program elements reside, suggesting that many companies have not yet moved up the supplier management maturity curve. These areas include "innovation," "benefits sharing" and "functionality and use of IT." Putting innovation at the core of supplier management efforts is something Spend Matters is seeing more and more in advanced procurement organizations, even in the area of sourcing, where the uptake of collaborative, optimization-based analysis tools is appearing stronger than other (in contrast to the "whack a savings mole" static RFI, sealed-bid and reverse auction approaches).

More curious (and telling) are general SRM adoption levels with leaders and followers. State of Flux observes, for example, that 30% of leaders have "all strategic suppliers fully engaged" in SRM programs compared with "only 3% of followers." Contrast this with follower adoption in which procurement teams have a "pilot group of suppliers willing to engage in SPM programs" and "no engagement at present." Respectively 22% and 6% of followers ticked the boxes on these areas (compared with 0% of leaders). From these responses (and those in the middle, which we didn't explore) and State of Flux's scoring, we can deduce that the more advanced companies are in SRM, the more likely they are to engage greater numbers of suppliers in their SRM efforts.

But what is holding followers up from SRM adoption? We'll explore this topic in the coming week based on the survey data.

Please click here for Part 1 and Part 2 of this series.

- Jason Busch

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