STATE OF FLUX
2014 GLOBAL SRM RESEARCH REPORT
BUSINESS DRIVERS & VALUE 51
SRM essentials
HOW DO TANGIBLE BENEFITS TRANSLATE TO FINANCIAL VALUE?
My SRM business case THE ISSUE Describe the business problems and opportunities that SRM will address. ANTICIPATED OUTCOMES Describe the anticipated outcome if SRM is implemented. RECOMMENDATIONS Summarise how SRM will address the business problems and realise the opportunities. JUSTIFICATION Justify why SRM should be implemented and the impact of not going ahead.
Notwithstanding the vagaries of benefits reporting and tracking, it is still clear that SRM presents a really compelling business case. However, as programmes develop and grow, the investment in people, process and technology will demand that financial benefits are better quantified and non-financial benefits are skillfully articulated in order to secure adequate funding. This means SRM will continue to have to answer the tried and tested business case questions, whether in the course of setting up an SRM programme or seeking to expand. SRM is a business change programme, not a procurement initiative. It must be aligned to the wider organisation and demonstrate clear links to the business goals and objectives. The development of the value proposition or business case will need to address two key challenges: ö ö Executive sponsorship: who should sponsor the SRM business case, why they should and how to engage them. ö ö Investment case: what investment is required and what return will be made from this investment.
EVIDENCE Provide evidence of success (external and internal).
COST BENEFIT ANALYSIS Illustrate the costs of implementing SRM, and compare them with the benefits and savings.
What is the business case? INVESTMENT
RETURNS
Financial benefits: typically 4-6% post-contract savings per supplier.
Programme: development and management, including communications and stakeholders.
Customer of choice benefits: e.g. faster speed to market, access to scarce materials, access to the supplier's ‘A team', first access to innovation.
People: designing roles / job descriptions, hiring, assessing, training, managing.
Process and governance: design and implementation (including templates).
Manage value benefits: youmay include benefits fromensuring that deals done are actually implemented (30-50%)*.
Technology: creating a technical specification, purchasing, implementing and maintaining.
*Note: this may be double counting the procurement savings.
It will be necessary to look closely at how financial benefits or savings are currently reported. Engagement with finance and other business stakeholders is necessary to develop simple and efficient benefit capture routines and reporting. There is certainly a case to consider this required functionality in a technology solution that enables benefits capture, reporting and sharing with stakeholders.
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