Supplier Relationship Management – nirvana or a mirage for procurement leaders?

Supplier Relationship Management, (insert the word ‘strategic’ if required), or SRM, is not exactly a new idea; I attempted to introduce it to the Department of Social Security in 1995, and I wouldn’t claim to be the first even at that point.

But it has remained an elusive beast.  Many organisations have implemented SRM programmes only for them to fade away over a couple of years, or disappear with a change of CPO or CFO when the required investment failed the business case test.  Why is this so? The general premise – that it will be mutually beneficial to work in a manner that goes beyond tactical procurement with your most critical suppliers – seems inarguable. And if we look at how much organisations spend with their top 10 or 20 suppliers, then it only takes a very small % benefit to justify some pretty serious effort.

So why is it so difficult to actually make it happen? That is the question.

Trying to answer that is Future Purchasing (FP) – a UK consulting firm – which has for years been a leader in both practical delivery and conceptual thinking in this area. Now Mark Webb of FP and Jonathan Hughes of the US based Vantage Partners have published a report: “Value Delivered by Strategic Supplier Relationship Management in Major Organisations” (snappy title guys…)

The report findings are based on a relatively small but very informed sample – the authors held structured interviews with the initiators and leaders of SRM programmes in 22 Fortune 500 companies.  So the report looks at how these leaders in the field of SRM work, and what makes them successful.  It identifies that “SRM objectives and practices vary significantly by supplier segment”, but suggests that there are some common critical success factors that can be applied by anyone wanting to make SRM a positive force in their own organisation.

The authors acknowledge that SRM hasn’t always had the priority it may deserve. As they say;

There is a common perception among procurement organisations that SRM is important, but something that may need to be deferred or paused during the current economic downturn while focus is placed on more traditional sourcing tactics.

But what I particularly like about the report is the focus on useful and really very specific content; there is nothing vague about it, and it doesn’t rely on survey results that don’t really tell you anything – like a lot of the reports I look at (“73% of CPOs work closely with their CFO”. Yawn.)

This report looks hard at best practice that has been demonstrated to work, and as such, it actually provides a pretty clear guide to how an organisation might actually implement and succeed with an SRM initiative.  A CPO starting such a programme for the first time could do a lot worse than use this as their template.

In part 2 of this series we’ll look in more detail at some of the specific thoughts and advice provided by Webb and Hughes, but in the meantime, you can download the document here from the Future Purchasing website.

* I’ve known FP for a long time, some of their senior guys are friends of mine, but we’ve never had a commercial relationship. I don’t know Vantage.

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