SRM in focus – more from the State of Flux supplier relationship management report

We featured a very initial view of the State of Flux SRM (supplier relationship management) report when it was launched recently.  Here are some further headlines from this impressive document – summaries across the six strategic areas that the report considers within the overall SRM picture.

Business Drivers and Value

The study found that the level and range of tangible benefits are increasing, notably in supplier service levels, supply chain efficiency, impact on profit margins, risk reduction and cost avoidance.

Around 25% of respondents (34%) of leaders report post contract SRM benefits to be worth 6% or more of the contract value. (I’d bring my normal scepticism about procurement savings measurement to bear here, and say “prove it” to those organisations! I’m not saying it isn’t genuine for some, but they’re pretty high numbers...)

Stakeholder engagement and support

Respondents report good progress but  none of the three stakeholder groups identified – senior management, business and operational stakeholders or suppliers - are fully engaged by more than 50% of respondents, although this is higher for the organisations defined as “leaders”.  Only 43% of respondents have created a value proposition, and only 14% have communicated this to all impacted stakeholders. That doesn’t say much for the strategic alignment of these programmes.

 Governance and process

This has seen the most improvement since the 2012 survey for both leaders and followers. “Single point” accountability is increasingly evident through appointment of process owners. Segmentation of the supplier base is commonplace, which is good news – more than 80% of respondents do it. And 60% of respondents say that SRM covers more than half their total spend. Developing an SRM operating model is making progress – over 50% report that progress is being made, but it is still problematic for many.

And on a less positive note,  only 47% of respondents have effective contract management in place for more than half of their key suppliers. For performance management the figure is only 38%. We’ll come back to this in a future post because it is a really important finding.

 People and Skills

Investment in training and talent development are still major challenges. The skills required are now more fully understood, and SRM is increasingly recognised as a role. But it is not always supported by formal job profiles, skills requirements and so on. In terms of training, there are significant gaps between demand and supply - the biggest gaps are for the relationship management skills such as influencing, communication and strategic thinking.

Information and Technology

Dissatisfaction has increased, with 20% of respondents saying IT supports SRM “very poorly” against 4% in 2012. That seems a little odd – technology has not actually got worse. So we can only assume that user expectations have increased. Perhaps people see better and more user friendly solutions coming along in other procurement-related  areas (Coupa being a prime example) and that reflects badly on what is available in the SRM area. State of Flux will of course hope that if more people buy their software product, this figure will decrease!

Relationship Development and Culture

Not terribly impressive results here in terms of the maturity of SRM. Innovation is still “a real dichotomy”. It is identified as important but relatively few succeed in embedding it in supplier relationships. (Actually suppliers seem a little more positive than buyers here). But less that 20% of buy side companies use 360 degree assessment tools, and only 40% collaborate with suppliers on a regular basis. One might ask what exactly the other 60% think SRM is, or what they see as its purposes  – and indeed, they’re not just rhetorical questions. We’ll come back to them in a later post.

In the meantime you can download the report here, free if you were a contributor or billable if you weren’t.

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