STATE OF FLUX
2014 GLOBAL SRM RESEARCH REPORT
GOVERNANCE & PROCESS 115
Analysis
GOVERNANCE AND PROCESS – THE BEDROCK OF SRM
different suppliers. The challenge is to make this process more transparent and inclusive of stakeholders, and to consider a wider set of criteria beyond the traditional spend and risk. This will mean companies will not only manage spend and risk but also be able to manage opportunity more effectively.
Good governance and effective / efficient processes are the bedrock of SRM. While personal and in particular executive level relationships are important, it’s good governance and process that provides the framework within which these relationships can function. C-level executives are staying in post for significantly less time than ten years ago and therefore an over-dependence on personal relationships should be avoided. A more structured and consistent approach to governance will mean relationships with suppliers become more robust, and are able to develop against a background of increasing change. SRM needs to make use of all three essential attributes of good business practice: people, process and technology. It seeks to strike a fine balance between exercising soft skills to develop rapport, influence people and events, and build trust; and providing the structure required to ensure the buy / sell relationship is under control so a strategic plan can be implemented. This can be described as the ‘art’ and ‘science’ of SRM. If developing people and skills is the ‘art’, then governance and process is the ‘science’ of SRM. Good progress continues to be made with many companies developing improved governance for their key supplier relationships. However, there are clearly some important challenges to be overcome.
SEGMENTATION AND PRIORITISATION
The optimum number of strategic suppliers a company should have has been a subject of debate since we started this research. There are almost as many definitions of strategic as there are companies. A multi-dimensional approach to segmentation will go some way towards the goal of really understanding which suppliers are truly strategic. So too will the proper level of engagement with the business. The output of segmentation will essentially be a list of suppliers with the most critical at the top. The arrangement of this list into the familiar strategic supplier pyramid will be the result of defining the supplier management treatment strategies to be adopted for each tier, and the available resource. There will always have to be compromises, but don’t fall into the trap of letting resource dictate how many suppliers are strategic. It is difficult to determine a standard number of suppliers an organisation should consider strategic, as this is governed by different factors unique to each organisation. However, from the survey respondents, most organisations are now settled on less than 25 as the optimum number.
PROCESS OWNERSHIP
Most companies now have an established SRM process owner. This should be the starting point for developing process excellence, consistency and best practice. However, while work has started on building governance and process in many companies, best practice models are not always well understood or deployed consistently. The role of the process owner needs to be examined with an increased focus on implementation and embedding in the business.
GOVERNANCE MODELS
Most companies are conducting periodic strategic reviews with key suppliers. But are these reviews really strategic? Many will be preoccupied with operational and transactional issues, and fail to address the key aspects of sharing business strategies and challenges. It is important these reviews really do focus on strategy and relationship development. Other issues need to be
SEGMENTATION
Supplier segmentation is now well established as a means to differentiate between the supplier management approaches to be adopted with
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