STATE OF FLUX
2014 GLOBAL SRM RESEARCH REPORT
ARTICLE 35
So, coming back to SRM and SPM, what are the differences?
They agreed that while good SPM yields both bottom-line savings and top-line competitive advantage, it is only one aspect of a genuinely best practice approach to supplier management. To them, building on a solid foundation of SPM and engaging proactively with your most strategic suppliers – to capture innovation; jointly develop new products and services; improve the efficiency of your operations; and speed up your time to market – requires the much broader and more relationship-based approach that is SRM.
We asked a group of senior SRM practitioners about what they saw as the difference between SRM and SPM, and our favourite answer was:
SPM is about looking backwards on past performance data to improve, whereas SRM is looking forward at the future direction and focusing on how to create new value.
Other differences the group discussed are below.
SRM
SPM
MANAGEMENT AND ACCOUNTABLE EXECUTIVES SRM will typically require an accountable executive to be assigned, who acts as the relationship owner for the company and oversees a relationship development strategy. The supplier manager will have more time allocated to developing the relationship and require an enhanced skill-set. The executive would become involved in operational issues through a structured escalation process. GOVERNANCE SRM requires a well-structured governance model, with roles and responsibilities of all parties articulated and communicated. It also requires a hierarchy of regular meetings with structured agendas and supporting processes. The key difference is the addition of a ‘top-to-top’ meeting where the accountable executives from both customer and supplier meet regularly. CEO SUMMIT OR TOP-TO-TOP MEETINGS These meetings should take place on a regular basis with a focus on strategic direction; information sharing; alignment of business goals and objectives; innovation; and creation of new value. PERFORMANCE MEASUREMENT There should be no fundamental difference in the way that performance measurement is carried out for supplier relationships where the focus is on SRM or SPM. Performance measurement is the basis for SPM, which in turn is a building block for SRM. The only difference being that for strategic suppliers there should be two-way measures. That is the supplier has measures on your organisation, such as forecast accuracy, on-time payment and quality of the information provided. This two-way measurement creates a greater sense of mutuality, as well as having a positive impact on performance.
MANAGEMENT AND ACCOUNTABLE EXECUTIVES When SPM is the primary focus, it is likely the responsibility will form part of a category manager’s role. Performance data will be gathered from the operational engagements and not usually communicated to executives unless something goes wrong.
GOVERNANCE Where the focus is on SPM, the formal governance structure will extend to local operational performance reviews and where appropriate, an aggregated performance review at a more senior level. These reviews should also include the regular risk review. CEO SUMMIT OR TOP-TO-TOP MEETINGS These meetings are not an integral part of SPM where meetings need to focus on performance metrics, issue resolution and immediate operational priorities. CEO involvement will usually only take place when something has gone wrong and been escalated. PERFORMANCE MEASUREMENT Performance measurement is fundamental to SPM. SLAs and KPIs should be clearly defined and agreed (and aligned to the contract). They should be measured and reviewed on a regular basis, with corrective and improvement actions agreed and executed.
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