GOVERNANCE & PROCESS
STATE OF FLUX
2014 GLOBAL SRM RESEARCH REPORT
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to become embedded and adopted as business as usual. In many cases this is because after an initial launch effort the process owner has stepped back and failed to monitor the full extent of the implementation and ongoing process compliance. The result has often been a drop-off in process compliance and a return to inconsistency and fragmentation. At worst, processes are abandoned altogether. While 70% of companies indicate oversight of SRM is at least adequate, we think the importance of this and the role that technology can play has been underestimated.
managed through operational forums developed as a best practice approach to governance.
A genuinely strategic review will have an agenda carefully designed to spend at least 80% of the time looking forward. The governance models described by respondents have a number of gaps. The most significant of these is the lack of regular risk reviews. In an environment when the supply chain risk landscape is constantly changing, this is clearly an area for concern. In most organisations with a reasonably well developed category management and strategic sourcing capability, a risk assessment is conducted as part of the sourcing process and is taken into account when the sourcing decision is made. If organisations are following their own procedures, there should also be an analysis of residual risk and appropriate contingency, and business continuity plans put in place. The challenge is post-contract. Who is responsible for ongoing risk management? What processes do they follow? What information and technology is there to support them? Another notable gap in the governance models is the absence of a RACI. The cross-functional nature of SRM demands that roles and responsibilities of key people are clearly defined. An increasingly used feature of the governance model is the relationship agreement. This can be part of the contract or more commonly an overarching agreement that defines ways of working.
OPERATING MODEL
The debate about the most effective operating model for SRM continues. Essentially it falls into two camps: those that believe it is fundamentally a procurement-led activity run by the procurement function with involvement and support from other functions; and those who believe it is a business-led activity with procurement as a support function. It is clear the overwhelming majority of companies see the procurement-led SRM operating model as their preferred option. There are also a number of companies that operate a hybrid model with some SRM activity (often IT) run by vendor management teams in the business. We see no evidence of a right way or wrong way. We only see the solution that best fits each organisation. Our advice is to keep an open mind and select the approach that works for you considering organisational culture, skills, capacity, etc. An important consideration in designing the operating model is to ensure it promotes business-wide ownership and involvement in SRM.
GOVERNANCE MODEL MATURITY AND OVERSIGHT
Governance is defined as ‘a method or system of government or management’. A method or system can be designed and built, but will only be effective if it’s properly implemented and maintained. Respondents to our survey have reported good progress in designing and building governance models for SRM. The challenge that remains is to implement and maintain the models, to ensure they deliver the desired outcomes. Leaders are twice as likely to have developed and implemented their governance model with all key suppliers. Following implementation we need to consider oversight. The road to procurement and supply chain excellence is littered with good intentions – that is, methodologies and processes that failed
THE FOUNDATIONS OF SRM
SRM is built on a solid foundation of good governance and process, starting with contract, performance and risk management. These fundamentals are not in place for many companies. This is a challenge for advancing SRM, but is more of a challenge and risk for the business. In ‘the current state of SRM’, we revealed that more companies are making relationship management and development the primary focus of their SRM approach. However, this focus on collaboration and creating more value must
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