COLLABORATION
COLLABORATION
55% OF LEADERS SEE SUPPLIER INNOVATION AS AN INCREASING ELEMENT OF THEIR GROWTH STRATEGY
92% OF FOLLOWERS DO NOT HAVE JOINT ACCOUNT PLANS FOR MORE THAN HALF THEIR CRITICAL SUPPLIERS
3% OF FOLLOWERS DO SEE SUPPLIER
Summary
66%of firms say SRMhas improved collaboration with suppliers
55% of leaders have experienced more innovation fromSRM, compared to 22% of all respondents.
Fig. 37. As a direct result of your SRM programme, which of the following has improved the most?
While commercial arrangements are always important, organisations get more value from strategic suppliers if they collaborate with them, rather than being in a constant state of tension, be it over price, service levels or a range of other potential disputes. We have shown that SRM is a provenmethod for improving supplier collaboration: 66% of respondents report that it has improved as a result of SRM. As expertise and technology have become more specialised, organisations are waking up to the fact that the best way they can innovate is by working with their suppliers. However, 35% of them say their approach to supplier innovation is ad hoc and only 8%would describe it as a key component of their growth strategy. Here, the results show a marked difference between SRM leaders and the rest of the pack: 23% of leaders see supplier innovation as a key component of growth while only 3% of followers do the same. Over half the leaders (55%) actively seek supplier innovation as part of their growth strategy. To this end, leaders are also muchmore likely to create joint account plans with a strategic supplier to foster growth. Inmany markets, trying to simply drive down price is already showing diminishing returns and will ultimately prove unsustainable. Working together is far more likely to result in sustained growth.
INNOVATION AS A KEY COMPONENT OF THEIR GROWTH STRATEGY
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In July 2018, Forbes magazine found 62% of life science, aerospace and pharmaceutical executives believe active and meaningful engagement with suppliers is essential to success. The result is a reflection of the prominence of supply chain collaboration in high-tech industries. These businesses know new ideas come from working closely with the suppliers, but collaboration is not a given in any relationship. It needs to be fostered and nurtured; it will not follow automatically when two parties sign a deal. As most businesses realise the race to the bottom on price is not sustainable, collaboration with suppliers becomes the engine to drive value for their customers and shareholders.
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SNAPSHOT ANALYSIS
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If your organisation is innovating with its suppliers, it is most likely to be on an ad-hoc basis. Unless you are leader in SRM, then you more likely to see innovation from suppliers as an increasing element of your growth strategy. Ad hoc innovation is fine, but if this is the majority of your innovation, you should ask yourself: if it fails, what have we learned? If it succeeds, can we repeat it? And, what are the risks involved? It is much better to have a systematic plan in place to lift the performance of the whole organisation.
G. Shared objectives H. Supplier executive engagement I. Joint planning L. Innovation M. Reduced supply chain risk
A. Collaboration B. Continuous improvement C. Mutual trust D. Compliance with contract SLA’s / KPI’s etc. E. Effective and
SRM boosts collaboration
When we asked all respondents where they are seeing improvements as a result of their SRM programme, 66% reported that collaboration had improved. The result seems a strong contributory factor for improvement across a range of both more tangible operational areas including continuous improvement (33%); SLA /KPI compliance (30%); governance (26%) and regulatory compliance (24%); and innovation (22%). However, there is evidently an opportunity for most procurement organisations to get higher returns from SRM: 82% of leaders say collaboration has improved because of investment in SRM. In innovation the difference is even more stark: 55% of leaders have experienced more innovation from SRM, compared to 22% of all respondents.
efficient governance
F. Regulatory compliance
82%of leaders say SRMhas improved collaboration with suppliers Fig. 38. As a direct result of your SRM programme, which of the following has improved the most?
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Mixed picture in supplier innovation
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In previous years, we have asked to what extent organisations are actively seeking supplier innovation. We have found around 85% say they are and 15% say they are not. While it still seems surprising that such a high proportion of companies are apparently willing to forgo the benefits of supplier innovation, we have to accept that for some it is not a priority. This year we focus on the extent to which those that are seeking innovation are benefiting. The feedback from all respondents reflects the somewhat confused strategy that many organisations have when it comes to supplier innovation. Over a third describe their approach as ad hoc and less than 1 in 10 would describe supplier innovation as a key component of their growth strategy, yet 28% of organisations see supplier innovation as an increasing element of their growth strategy. We see different a picture when we look at leaders and fast followers. A much larger proportion of both of leaders (23%) and fast followers (18%) see supplier innovation as a key component of their growth strategy. Over half the leaders (55%) are actively developing supplier innovation to play
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G. Mutual trust H. Shared objectives I.
A. Collaboration B. Innovation C. Effective and efficient governance D. Continuous improvement E. Supplier executive engagement F. Compliance with contract SLA’s / KPI’s etc.
Regulatory compliance
L. Joint planning M. Reduced supply chain risk N. Other
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STATE OF FLUX
2018 GLOBAL SRM RESEARCH REPORT
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