Getting value from Supplier Relationship Management

I confess - I stopped subscribing to CPO Agenda, ("CIPS answer to the Harvard Business Review" )  when they stopped offering the Fellows' discount.  Which was a shame as I usually found at least one interesting article per issue.

So I've just caught up with this article on Supplier Relationship Management (SRM)  ("Building the Case for SRM") written by Mark Webb of Future Purchasing and Jonathan Hughes of Vantage Partners (not to be confused with Jon Hughes, procurement guru extraordinaire,  also of Future Purchasing).  Future Purchasing have been thought leaders in this sphere for some time in my opinion, and this gives an interesting perspective on developing a successful SRM programme and in particular how to make the business case and get the resources needed in order to make it happen.

It is based on a survey and I suspect it is therefore a little self selecting; the participants are clearly those organisations who have gained value from their SRM initiatives.  My own experience is that many organisations are either still not convinced of the value, or have made an attempt - probably somewhat half-hearted- at SRM, then given up fairly quickly.  So it is good to hear of some success stories.  And there are some useful ideas here;  for instance, I liked the idea of setting a clear target for SRM savings; as the article says,

"Consider setting a target for post-contract savings, with one per cent used by one
organisation. This generated an ROI>100:1 and increased dedicated SMR resources
from two to 23."

I suspect that programmes often fail because their objectives are too vague and fluffy; "improve relationships" or similar.  They end up with Board people from the two organisations having a jolly nice lunch and a chat - and that's about it.  Setting targets and monitoring real delivery of value has to be the way to make SRM tangible and justifiable.

And this has very interesting application in the  UK public sector (and probably for government contracts elsewhere).  As we go into a period of financial austerity, public sector organisations will need to take cost out of existing contracts, some of which are pretty long term, (PFI, outsourcing etc.)  That can't be done by simple supplier-bashing; it will need some clever SRM techniques in order to succeed. Some public organisations have embraced this, but for many it is still in the 'too difficult' bag.

So this is an area where we still have plenty to play for in terms of proving the value that 'procurement' (in its widest sense) can bring to organisations; put it on your priority list for 2010 if it isn't there already!

Peter Smith

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