2021 Global SRM Interactive Research Report

SIX PILLARS OF SRM

An effective supplier management programme should not be a one-size- fits-all approach applied to everyone in the supply base, but, rather, targeted and focussed on key strategic suppliers, identified through the segmentation process. Once identified, the relationships with these strategic suppliers should be underpinned using the best and most appropriate process, governance, and engagement models. Roles and responsibilities among both parties should be fully agreed and robust contract, performance and risk management should be both defined and implemented.

It is crucial to have the right knowledge and skills within the team undertaking supplier management to drive engagement, foster collaboration and create value for both parties. Furthermore, the skills and competencies required to undertake these roles – which are more closely aligned to account managers than typical procurement roles – should be fully defined and linked to performance objectives. Carrying out an evaluation of the skillset of those currently in the role against desired/required levels allows for the identification, development and application of a targeted training and personal development programme.

State of Flux published its first SRM research report in 2009 under the title of ‘VALUE ADDED’ Supplier Relationship Management. The content referenced the building blocks of effective SRM namely, Segmentation, Accountability, Process and Governance and Value. Within a couple of years this initial thinking had been developed to create ‘The Six Pillars of SRM’ as a best practice model comprised of Value; Engagement; Governance; People; Technology and Collaboration. This has now become the standard for not only gathering information for this report, but also building broad SRM capability in companies seeking to drive more value from supplier relationships.

Read more on governance on pages 48 to 53.

Read more on people on page 62 to 67.

Technology enables supplier management processes and practices to seamlessly integrate in a business- as-usual way. Adhoc processes result in an inconsistent supplier experience and processes that can’t be measured mean opportunities are missed to unlock value. Fit-for-purpose supplier management technology offers a single interface that reveals all supplier- related information both as a primary data source and connected with third party data sources. This ‘industrialises’ supplier management, ensuring it is scalable, repeatable and consistently applied across different business units.

Collaboration with strategic suppliers is crucial in supporting the improvement and development of productive, two-way relationships that create value. With becoming a customer of choice with targeted suppliers a key goal of supplier management, it is important to work together with them to develop joint plans, to ensure delivery against both organisations’ strategic goals. To enable this, relationships should be open and based on trust and transparency – something that can only be achieved by investing time and effort in building those relationships.

Engagement and obtaining support across three key groups of stakeholders is vital to ensuring supplier management programmes have the best chance of achieving success. The first group of stakeholders are c-suite/executive leaders and managers, who provide direction, role-model behaviours and access to sponsorship. The second group are operational and wider business stakeholders who regularly interact with strategic suppliers. The final group are the key, strategic suppliers themselves, who can be worked with collaboratively to manage innovation, performance and risk, delivering benefits for both parties.

It is crucial that value is aligned to strategic objectives when the value proposition is being developed and that there is a clear understanding of the financial and non-financial benefits that may derive from supplier management programmes. Having done this, it is important to understand the extent to which the ability to achieve them is dependent on contributions from key/ strategic suppliers, and if there is more that could be done with them to allow goals to best be met.

Read more on technology on pages 74 to 79.