Luxury brands' approach to srm
STATE OF FLUX
2014 GLOBAL SRM RESEARCH REPORT
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Figure F. How SRM has changed the nature of supplier negotiations
○ LEADER ○ FAST FOLLOWER ○ FOLLOWER ○ LUXURY BRAND
BETTER OUTCOMES FOR BOTH PARTIES
QUICKER TO REACH AGREEMENT
MORE CONSTRUCTIVE TONE / DISCUSSIONS
SUPPLIER BRINGS MORE ADDED VALUE TO THE TABLE
LONGER TERM PERSPECTIVE TAKEN BY BOTH
LESS ADVERSARIAL
LESS LEGAL INVOLVEMENT
NO CHANGE TO NEGOTIATIONS NOTED
0% 10% 20% 30% 40% 50% 60% 70% 80%
MORE GOVERNANCE AND PROCESS REQUIRED TO BECOME LEADERS IN SRM
Sunseeker recognise the strategic nature of suppliers. Part of the Sunseeker experience is giving customers the ability to customise their own boat. Because of this, there is a need for the supply chain and suppliers to be very flexible and adapt to customer requirements, while still delivering exceptional quality. Stephen Potts said, “We can’t achieve this on our own, we need the support of our strategic suppliers, and like everything, there is a need to continually improve on how we interface and collaborate with them to ensure we remain a customer of choice.” When we investigated the luxury brand organisations’ average SRM index scores, we noted that overall their average was 3.0 which was similar to the followers. However, on closer observation we noted that the luxury brand organisations scored higher in the pillars that involved human involvement or interaction, and lower in the pillars that required more structure, such as governance and process. This was mirrored in our interviews and site visits where we saw some good examples of treating suppliers as part of the ‘family’, integral to their eco-system, yet very often they had only the beginnings of a process or structure in place. So has SRM changed the nature of negotiations with key suppliers for luxury brands? We can certainly see in figure F it has brought more constructive discussions and better outcomes for both parties.
Luxury brand organisations are extremely good at the human elements of SRM. The value proposition is clear and they recognise the need to have strong collaborative relationships with suppliers. They need to be a customer of choice to maintain their position in the luxury goods market and continuously improve the customer experience. However, there remains an opportunity to introduce more structure and rigor to their governance and process models. Luxury brand organisations vary in size and complexity, and as such have many of the same characteristics and challenges as other companies. One such challenge is an over- reliance on personal relationships, particularly at an executive level. As vital as these are, they need to be supported by an appropriate governance model that provides structure and continuity. These important supplier relationships need to be ‘change proof’, that is, able to withstand change either in a personnel or business environment. It is a good governance model including a meeting schedule, standard agenda items, and defined roles and responsibilities that will help them be more resilient.
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