Exploring SRM Trends: Technology, Tiering and Penetration Rates

We’re excited to continue our exploration of SRM trends based on our interview with State of Flux’s Alan Day. Alan and his team are currently gathering data for the next iteration of the annual survey, hoping to gather as much data from both buy-side and sell-side participants (companies can click the previous links to participate, get a copy of the results and benchmark their SRM capabilities). We encourage you to participate!

Spend Matters: What types of suppliers are most likely to respond well to an aggressive SRM programs (e.g., joint product innovation, multi-tier joint cost take out, etc.)?

State of Flux: I can’t help thinking that aggressive SRM is a bit of an oxymoron. I prefer proactive. It’s really hard to categorize the suppliers that respond best to SRM (could be a great question for next year!) but if you push I’d say it’s a culture thing. Suppliers that are innovative, open, collaborative and probably ambitious, to name a few. And resilient if they are involved in the second or third attempt to get SRM off the ground. My advice would be to hang in there, as there are more and more companies trying to do this well.

Spend Matters: How is the role of technology changing in SRM?

State of Flux: Our research tells us the progress towards more effective SRM is relentless. However, the role of technology has consistently been reported as an area of concern and no little confusion. Very few organizations have effectively used technology to directly enable SRM. The vast majority are taking information from a variety of different sources and manipulating it via a SharePoint type solution or more often simply in Excel spreadsheets. This leads to inconsistency, additional workload and is ultimately not repeatable or scalable. As SRM programs gain more traction, we are seeing many more organizations looking for an effective information management, collaboration and reporting space for their key supplier relationships.

Spend Matters: What would you estimate are the penetration rates of different SRM technologies in the Global 2000?

State of Flux: This is a tough one! It really depends what you classify as SRM technologies. Good SRM requires information from multiple sources, including systems such as ERP, P2P, contract management, performance management, risk, supplier registration and qualification, etc. These could all be classified as SRM technologies, but none of them have the functionality required to bring all this information together and present it as “one version of the truth” and make it accessible to all those who need it. In addition, none of them provide functionality to start using the information to manage and develop the relationship. In short, SRM technology has barely penetrated the Global 2000 at all.

Spend Matters: Within industrial manufacturing, how does the current use of SRM compare with other areas?

State of Flux: Here at State of Flux we have a few colleagues that have worked in manufacturing. They will say that in complex manufacturing such as automotive, aerospace, FMCG, etc., SRM has been significantly ahead of other sectors. Indeed in some companies such as Toyota, it is a way of working that has been an integral part of the Toyota Production System for more than 50 years. However, I believe the gap is closing. Last year we saw companies from oil & gas, chemicals and the services sectors amongst our “leaders.”

Thanks to Alan Day and State of Flux for taking the time to answer our questions! We encourage you to participate in State of Flux’s latest survey here: buy-side and sell-side (click the respective links).

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