STATE OF FLUX
2014 GLOBAL SRM RESEARCH REPORT
Luxury brands' approach to srm 21
Figure E. Percentage of organisations with a plan to support being a customer of choice
Compares to a 31% average
60%
○ YES ○ NO ○ DON’T KNOW
50%
40%
30%
20%
10%
0%
LEADER
FAST FOLLOWER
FOLLOWER
LUXURY BRAND
© 2014 State of Flux
THEY RECOGNISE THEY ARE ONLY AS GOOD AS THEIR WORST SUPPLIER
We can see in figure E , luxury brand organisations scored higher than average; a profile similar to leaders and fast follower organisations. Partly this is due to the cache of the brand, but we think it’s more due to the effort they put into the supplier experience. Somewhat surprisingly, less than 50% of luxury brand organisations have a strategy or plan in place to improve their standing as a customer of choice with key suppliers. Although this is still higher than the overall average of 31%. We did note that overall, the luxury brand organisations are less likely to be structured in their approach to SRM, compared to peer organisations with a similar SRM index score. There were some notable exceptions. Harley- Davidson adopts a partnership approach as opposed to treating suppliers as commodities. They work hard to engage their suppliers in design and product development, and try to make it a bit more fun to work with them – often inviting suppliers to customer events or bringing bikes and merchandise to supplier meetings.
BMW: the honourable merchant
Each year in the SRM report we highlight the need for segmentation and focusing effort on the top tier of suppliers. Interestingly, luxury brand organisations often extend their focus to any supplier that can affect the customer experience. This is especially evident with those that manufacture products. For manufacturing organisations, the second tier of preferred suppliers is usually larger than other organisatons, and will include all suppliers that produce an item used in the end product. We have written in the past about ‘only being as good as your worst supplier’ and this mantra is practiced by luxury brand organisations with their fastidious approach, especially to supplier quality. Unfortunately this expansion of the preferred supplier tier and focus on performance management can sometimes cause confusion in luxury brand organisations. This confusion is often between supplier performance management and supplier relationship management, as well as a merging of the first two tiers of supplier segmentation. This is to the detriment of an SRM approach that should be putting more focus on genuinely strategic suppliers.
The family-owned nature of BMW has fostered the development of suppliers being treated as a part of the BMW family and the birth of the idea of ‘the honourable merchant’. They strongly believe in ‘treating others as you wish to be treated’ and that supplier relationships go beyond business relationships. They recognise their reliance on the abilities and innovations of suppliers for business growth and development, therefore close relationships are more highly valued than short term negotiation strategies.
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