SUMMARY
CALL TO ACTION
CALL TO ACTION For most organisations, establishing effective supplier management is an ongoing journey. We partner with those who wish to improve the maturity of their programme, help them to overcome challenges and accelerate the delivery of value. Our most frequently shared advice is summarised below.
and governance for each segmented group of suppliers and then drive compliance. CALL TO ACTION 5 People development is a process. Delivering training that is not targeted or clearly aligned to the needs of the business and the individual is wasteful both in terms of time and money. Review supplier management roles and determine the required skill set. Next, assess current capabilities against those skills and seek training solutions.
by dedicated technology, this is not always the case for equally crucial activities such as performance, risk and relationship management.
SUMMARY
A year into the Covid-19 pandemic, establishing effective supplier management continues to be a pressing issue for most organisations wishing to strengthen their supply chain against future disruptions.
Collaboration is a fundamental building block
Enabling and promoting collaboration are fundamental building blocks that distinguish the best supplier management programmes from the rest. Most Leaders agree that their mature programmes have had a positive impact on supplier collaboration. Benefits generated from increased collaboration include building more trust, establishing a better understanding of mutuality, getting suppliers more engaged in continuous improvement and innovation, and reducing the number of disputes and escalations.
Overcoming common challenges
CALL TO ACTION 2 Put more time and effort into exploring the ways you can capture, quantify, and report both financial and non-financial benefits.
This year, the most recurring challenges were “competing and changing business priorities”, followed by “organisational change” and a “lack of budget and resources.” They all relate to the combination of the value proposition and senior stakeholder engagement. If the value proposition is sufficiently aligned to the organisation’s strategic objectives, the senior stakeholder group has little choice than to be invested in supplier management as one of the means to deliver that mission.
Close the technology gap
Rise in satisfaction with progress
the skills required for them, assessing their current capabilities, and last but not least, investing in training to close any potential gaps. Organisations with less mature programmes struggle to provide employees with the targeted training that will help them perform well at their day-to-day supplier engagements.
Underinvestment in technology to support a process as critical as supplier management is a trend that needs to stop. Modern IT solutions can help you establish best-in-class supplier management while ensuring that everyone in your organisation follows a consistent and structured approach to each supplier engagement. CALL TO ACTION 6 Invest in dedicated IT solutions that can make supplier management a more efficient process while promoting digitisation, automation, and collaboration. Don’t solely focus on the bare minimum of contract management. IT solutions can help you in all types of activities such as risk, performance, and relationship management.
Nearly 78% of respondents report satisfaction with progress achieved by their supplier management programme in the past year. A significant rise compared to last year. Challenges encountered are familiar and in line with the findings of previous years. The most referenced of these are: competing
Engage more with your suppliers
Want to gain a better understanding of how you are perceived as a customer? Want to know what you can do to become easier to do business with? Want to find out how supplier interactions could be more efficient? Want to discover how to become a customer of choice? If you answered ‘yes’ to any of these, you need to contact your key partners to get their input and go from there. CALL TO ACTION 3 Reach out to suppliers with a properly designed and administered questionnaire to gain genuine insights from a range of perspectives – and action the results.
Financial benefits driven by supplier management
and changing business priorities, organisational change and a lack of budget and resources.
Amongst Leaders, the gaps in governance are closing fast
While most organisations are comfortable quantifying traditional cost-reduction or cost-avoidance benefits, only the most mature are capturing and measuring other advantages such as risk reduction, innovation, and other efficiencies. Risk and cost reduction continue to be the most important drivers for developing supplier management Following the Covid-19 outbreak and its severe consequences on global supply chains, it’s unsurprising to see risk management and risk reduction as the primary business and value drivers for supplier management. While risk is the priority this year, businesses have not lost sight of broader opportunities with cost reduction and supplier innovation continuing to be desired outcomes.
Value isn’t mono-dimensional
A fundamental mistake in establishing an effective supplier management programme is to underestimate the importance of setting up the right governance for each supplier. A lot of the less mature organisations skip the foundations of contract, performance, and risk management and then struggle to maximise the value they achieve from each relationship. Leaders, however, have conducted significant work to establish robust governance that maximises their return on investment. Examples include supplier segmentation based on diverse criteria, the establishment of treatment strategies, and clearly defined methodologies in their contract, performance, and risk management.
Engagement with senior stakeholders, the business and suppliers is key The organisations that excel at achieving value have strong engagement and support from the three critical stakeholder groups: executives, the business and suppliers. Another distinction between mature programmes and developing ones is that the former gather structured feedback from suppliers on a regular basis. This allows them to adjust their treatment strategies and prioritise relationships that will generate the most value, be it financial or non-financial. When investing in people, prioritise closing the existing skill gaps Investment in people and skills development remains under- represented in 2021. As with other areas, we continue to see a significant gap among Leaders, Fast Followers and Followers. Those with the more mature programmes have completed most foundational tasks, such as defining the supplier management roles, identifying
To appeal to the largest number of stakeholders the value proposition needs to explore the maximum number of opportunities and remain aligned to both the company’s strategic objectives and its business cycle. In its traditional definition, value can be linked to financial gains, however, it should also include strategic benefits, risk reduction or risk resilience benefits, as well as emerging definitions of value linked to environmental impact, diversity and inclusion (D&I) and social value. CALL TO ACTION 1 Revisit your value proposition, align it to your organisation’s strategic objectives and re-engage with stakeholders.
Collaboration is not an end in itself
Don’t ignore the fundamentals
Collaboration is clearly a positive development in relationships, but it must be seen to deliver value in ways - and a timeframe - the business can see. CALL TO ACTION 7 Ensure you have picked the right suppliers to partner with and then increase focus on relationship development, joint planning, and value creation at speed. Email us to discuss how we can help you accelerate value from your supplier relationships at: enquiries@stateofflux.co.uk
Contractual compliance and risk management shouldn’t be optional. The supplier management dividend of value over and above the contract will always be more difficult to achieve, and to some degree pointless, if value already thought to be secured via the contract is leaking away. Ensure you have the right people in the right roles, with the right training to handle the job. Similarly, you need to have the correct approach to each key supplier in place. CALL TO ACTION 4 Develop supplier management treatment strategies that clearly define the requirements for contract, performance and risk management
Technology remains the least developed capability
Results speak for themselves
Covid-19
Having made such a big thing of the value proposition with stakeholders don’t be surprised when they want results. Many companies that report having difficulty capturing and reporting gains are failing to quantify the benefits they achieve.
Lack of dedicated supplier management technology continues to be a theme among a surprisingly high number of organisations across all maturity levels. Although some activities such as supplier on-boarding and contract management tend to be supported
The pandemic continues to have a significant influence on life and business-alike; whilst directly influencing supplier management, it has also served to highlight its importance within organisations.
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STATE OF FLUX
2021 GLOBAL SRM RESEARCH REPORT
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