VALUE
VALUE
43% OF ORGANISATIONS SEE SUPPLIERS AS THE VEHICLE TO DELIVER MORE INNOVATION
6% OF COMPANIES PLACED HELPING ACHIEVE SUSTAINABILITY GOALS IN THEIR TOP THREE BUSINESS DRIVERS FOR SRM
46% OF LEADERS ACHIEVED FINANCIAL BENEFITS OF MORE THAN 4% AFTER SIGNING SUPPLIER CONTRACTS
Summary
SNAPSHOT ANALYSIS
A value proposition can demonstrate not just the saving in supply-side costs, but also broader benefits including innovation, product development and customer retention.
In our introduction, the Carbon Trust, a body which certifies programmes to reduce greenhouse gases, pointed out that 60% and 95% of CO2 emissions come from the value chain, either upstreamwith suppliers or downstreamwith customers. Organisations who succeed inmeeting ambitious carbon-reduction targets will do so in conjunction with suppliers, but only if relationships with them are managed accordingly.
In 2018, we’ve seen a big leap forward in attracting business confidence inmanaging supplier relationships. Half of organisations have now secured a value proposition for SRMwhile last year only a third of businesses did the same. While reducing risks and costs are the greatest drivers for SRM, access to innovation now ranks third, another milestone in maturity. But elsewhere there is cause for concern. Sustainability is not seen as a key business driver for SRM: only 6% of organisations rank it in their top three, while just 5% of respondents see sustainability as a non-financial benefit of SRM. However, leaders in SRM continue to demonstrate its financial value: 46% of them achieved financial benefits of more than 4% after signing supplier contracts.
Companies building a value proposition for SRM are in themajority for the first time. Fig. 1. Have you developed and documented a clear value proposition and/or business case for SRM?
Fewer than half respondents see sustainability as part of the SRM value proposition Fig. 2. Does your value proposition specifically mention sustainability?
Sometimes business value is purely a numbers game. Costs and sales are easy to count, so they can become de facto definitions of value. But other measures are also important, especially if an organisation is looking to its long-term sustainability. Intellectual capital, brand reputation and goodwill are all very valuable to business, but much more difficult to define and measure than costs and sales. Procurement teams must understand which value or values they hope to influence when proposing, planning, executing and assessing SRM. In this area, we have seen progress in the last year. Globally just over half of organisations now report having documented an SRM value proposition; a significant increase on last year when the figure was just 33%. A geographic trend has been driving increasing popularity of the value proposition: in Europe, the number of organisations developing and documenting a clear value proposition leapt from 31% to 49% between 2017 and 2018. In North America, the figure is up from 38% to 62% over the same period, while in Australasia it moved from 33% to 44%. While it is encouraging to see the development of a value proposition become a greater priority in SRM projects, there is room for improvement. There is a strong correlation between leaders in SRM and those underpinning SRM investment with a value proposition. Nine out of ten leaders have an SRM value proposition, while only 43% of followers can say the same. Where a value proposition is in place, almost all respondents say sustainability is part of it [see Fig. 2]. However, the result may offer a false sense of the prominence of sustainability in SRM investment decisions. In Fig. 4, we see only 6% of respondents regard it as one of their top three reasons for SRM investment. But the value proposition should cover all potential value. It is an expression of all the areas in which SRM could improve outcomes. A value proposition can demonstrate not just the saving in supply-side costs, but also broader benefits including innovation, sustainability and brand value. Even if respondents do not regard sustainability as a specific driver for SRM investment they still think it is worth mentioning in the value proposition.
50% Yes 40% No 10% Don’t know
47% Yes 46% No 6% Don’t know
Leaders remain far more likely to have developed an SRM value proposition.
Fig. 3. Have you developed and documented a clear value proposition and/or business case for SRM?
Leader
Fast follower
Follower
Yes
91%
65%
43%
No
5%
24%
48%
Don’t know
5%
12%
9%
22
STATE OF FLUX
2018 GLOBAL SRM RESEARCH REPORT
23
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