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SRM Unplugged: Expert Answers to 8 Burning Questions

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Leading procurement organizations today know that investing in supplier relationship management pays real dividends for the enterprise. But knowing a practice is beneficial and knowing how to implement it are entirely different things.

Just how can you justify the investment in SRM, and how long will it take when you start? Do supplier-led innovation and supplier awards have a role to play? These are the kinds of questions your procurement peers have been asking us.

To help take SRM from theory to practice, we teamed up with David Atkinson, distinguished procurement leader and Managing Director, Four Pillars Consulting, who answered these top real-world questions on SRM during a recent webinar: “Supplier Relationship and Value Management: The Five Program Killers and How to Overcome Them.”

1. How can you justify the investment in SRM?

There are two ways to do it. As in any change program, you bring up examples of past failure, where there has been a cost to the organization, or a cost to the organization of others. You look at the consequences of doing it badly, or you begin to draw upon the experience of others in the upside — the benefits and the business case of achieving incremental value from supplier relationships. You have to juggle between the bad and the good in the development of a business case.

2. Who should own SRM implementation, the business unit or procurement?

The overall program should be owned by procurement, as we are the experts — we understand the procurement toolkit far better than the stakeholders. But this leads to a second question: Who should lead the implementation of a specific supplier relationship strategy?

Well, that depends on the category. If it is a production environment, or if it’s a repeat purchase environment, often the management resides with the procurement manager. But if you are buying IT services from one of the big name global providers, then the idea of having a category manager leading those discussions is not the way forward; it should be someone from the CIO’s office.

3. What’s the timeline for SRM implementation?

This is like asking, “How long is a piece of string?” The good thing is we’re already doing SRM. We are already managing suppliers in terms of performance. What needs to be done next is to pull all of that together into a clear, coherent strategy.

But how long does it take to get off the ground? Realistically, you want to deliver tangible results at the same time and not bite off more than you can chew. There’s a real battle to to convince senior management and stakeholders that SRM doesn’t provide immediate results. We have to start applying processes and strategies before it starts to work, as it’s a bit of a slow burn.

4. Do we need to have a clear strategy in selecting the kind of suppliers to be included in SRM?

Supply-based segmentation is a crucial enabler in deploying SRM in any organization, because we don’t have infinite resources and we’d love to manage every supplier as intensely as we could since all of them have potential in value improvement. But that segmentation requires a process. We have to think about how important we are to the supplier. If we’re working with a global IT provider, often we find that the supplier will have more influence as a provider. The customer isn’t always king. Therefore, we have to think what the value potential is, what resources are required and how we manage the supplier geographically.

5. What about SRM in an industry like Oil & Gas, where the supplier base in the current market is continually changing?

The supply base is continually changing. There are still a lot of important suppliers who stick around for a long time. I would go back to the issue of segmentation. You choose to go to the suppliers who create the most value or where you’ve got a relationship where you can set the agenda on.

6. How important is it to be the customer of choice?

We all like to be the customer of choice, but the first step is for everyone to recognize that suppliers have choices, too. Just because we’re the customer doesn’t mean we’re always going to have the best service, the best ideas and innovation. So it’s always good to be the supplier’s choice.

Being a supplier’s choice is a gateway to getting more value. We must not lose sight that collaboration is what we’re trying to achieve. Collaboration is a means to an end and being the customer of choice to the supplier gives us that opportunity to work positively together.

7. Is supplier-enabled innovation an integral part of SRM?

Yes, absolutely. We are always trying to identify the suppliers within the supply chain or supply network that can genuinely add value to our business and ultimately give us competitor advantage. The more we can integrate with suppliers who hit the spot with creativity, the more successful we’re likely to be, as we’re going to be ahead of everyone else.

8. When looking to implement supplier awards, how can you ensure they are credible and not just seen as another flavor of the month idea?

Sometimes having a supplier reward scheme is a way of reinforcing how we want the supply network to view our organization. When we think about how value is achieved through real intensive engagement with suppliers, then I prefer on both sides to think systematically about what real relationship drivers are and then what can achieve the value. I think supplier rewards are a good tool, but don’t provide a real way to find value.

Andrea Brody is chief marketing officer at BravoSolution.  

This interview has been edited and condensed from BravoSolution’s Real World Procurement Series, an established international series of online briefings designed specifically for procurement professionals, delivered by real-world experts. The Real World Procurement Series is designed to provide procurement professionals with essential insights into procurement practices — the people skills, process efficiencies and empowering technologies needed to drive a successful procurement function.

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