VALUE
VALUE
85% among Followers). Leaders and Fast Followers also agreed on social value as the second most used definition of value. It was placed third among Followers for whom the second most popular response was budget reduction (at 40%). Cutting budgets was lower on the list for both Leaders (27%) and Fast Followers (35%).
The most important business drivers for investment in implementing/ developing supplier management in the next 12 months
Supplier management programme benefits
SUMMARY
Risk management/reduction was rated across all maturity levels as the most common area in which respondents saw financial or non-financial benefits from their supplier management activities so far [see chart]. Figures ranged from 85% (Leaders) to 78% (Fast Followers) and 66% (Followers). Indeed, respondents across all three maturity levels also agreed on the other ranks, with cost reduction in second place and cost avoidance in third (both with similar decreasing percentages as maturity drops). The only minor divergence from this was with Leaders, where supplier innovation was ranked in joint third place alongside cost avoidance on 64%. Respondents were also asked to indicate whether, for those benefits identified, they were able to measure a financial advantage. The answers to this question demonstrate a clear and distinct difference among Leaders, Fast Followers, and Followers, and an obvious opportunity for Followers in particular to make improvements. Leaders and Followers alike appear able to quantify cost reduction (61% overall) and avoidance (55% overall) – albeit with the level of positive responses decreasing as respondent’s organisations become less mature. However, Leaders are clearly better at quantifying other benefits than Fast Followers/Followers, namely across risk management/reduction (34% among Leaders vs. 26% Fast Followers/21% Followers), supplier innovation (22% vs. 18%/9%), supply chain efficiency (22% vs. 13%/9%) and supply continuity (22% vs. 17%/15%). The identification of financial benefits away from those linked to cost is clearly an area for Fast Followers and Followers to learn from Leaders and develop this ability in future years. As we see the focus continue to shift to identifying different benefits and capturing those in any business case, there will be an ever-increasing requirement to supplement this with providing any measurable financial benefits. When asked to identify the financial benefits delivered by their supplier management programmes, the research yielded some very useful insight. →
(all respondents)
Over multiple years of conducting our research, we have witnessed growing appreciation among both procurement professionals and their business stakeholders that the benefits derived from effective supplier management are not only linked to savings. They can also come in a much wider array of financial and non-financial benefits. Examining this year’s results against those of last year’s we see some clear consistencies. The key business drivers behind supplier management remain the same, with risk management/reduction being the most popular motivator. There is also convergence among respondents of all maturity levels about how their organisations define value. Several findings highlight opportunities for organisations to improve their approach. For example, identification of the value that is derived from supplier management has decreased compared to last year’s results. And while Leaders are better able to quantify a financial return across the range of supplier management benefits, there is room for Fast Followers and Followers to develop in this area.
Risk management/reduction
63%
Cost reduction/avoidance
Value proposition
45%
An overwhelming majority of Leaders have developed and documented a clear value proposition and/or business case for supplier management (97%). This represents an encouraging increase on last year, when 89% responded in the same way. Similar rises are seen across the maturity levels, with Fast Followers increasing from 68% to 80% in the past year, and Followers from 36% to 42%. However, it is clear from their percentages that there remains a great opportunity here to close the gap with Leaders. Among industries, Aerospace and Defence was out in front, with 83% saying ‘yes’, which was 16% higher than the next best industry (Education & Research). Interestingly, Transport and Logistics was the biggest ‘no’, with 55% indicating that they had not undertaken this activity. A total of 97% of Leaders said their supplier management proposition is directly linked to the way their organisation defines value. However, in response to this question, Fast Followers (84%) and Followers (69%) are significantly closer in terms of response, showing a greater convergence across maturity levels. Nine out of 10 in Pharmaceuticals indicated that there was a direct link between their supplier management proposition and their organisation’s definition of value (with Professional Services at 88% and IT, Telecoms and Media at 87%). The clear industry leader here was Travel and Leisure, where all said their supplier management proposition was directly linked to the way their organisation defined value. Geographically, Europe and North America scored lowest with 80% and 76% respectively.
More supplier innovation and continuous improvement
41%
Supply chain resilience
36%
Quality and service level improvement
26%
Helping achieve your responsible business and sustainability goals
22%
Regulatory compliance
18%
Improving your end customer experience
Business drivers
This marked a significant increase from 2020, where it placed fourth among this group, cited by 42%. This is most likely to have been prompted by the impact of Covid-19. Organisations have had to adapt and react to significant challenges the pandemic has had on production, supply chains and global distribution over the past year or so. A boost in resilience will also help supply bases meet future challenges and marks a potential shift from being reactive to proactive in the face of unforeseen issues.
16%
The top five business drivers for implementing or developing supplier management over the next year matched those of last year (both in terms of content and order – see graphic). Risk management and reduction was again the most popular response, with 63% saying it was their key motivator. Cost reduction or avoidance and more supplier innovation and continuous improvement were the other drivers in top three list, at 45% and 41% respectively. While risk management/reduction was the most popular cause across all levels of maturity, we see some divergence concerning the second most important driver. Follower’s responses matched the overall results (with cost reduction/avoidance in second), whereas Fast Followers placed more supplier innovation and continuous improvement in that position. The main deviation from the overall results was with Leaders, however, who placed supply chain resilience second (with 55%).
Improving supply chain efficiency
15%
63 %
Improving your internal customer experience
11%
INCLUDERISKMANAGEMENT ASATOPTHREEBUSINESS DRIVEROFSUPPLIER MANAGEMENT
Faster speed to market
7%
36 %
Defining value
STATESUPPLYCHAIN RESILIENCE ISONEOFTHEIR FOURKEYMOTIVATORS
Respondents to this year’s research overwhelmingly define value as cost reduction/avoidance – overall it was the highest response (82%), marginally less than double the next most cited response, which was social value with 42%. Cost reduction and avoidance as the predominant definition of value was consistent across all maturity levels, albeit with a smaller majority as maturity increased (69% among Leaders; 81% among Fast Followers;
45 %
STILLPRIORITISECOST REDUCTIONASADESIRED OUTCOMEOFSUPPLIER MANAGEMENT–ASLIGHT DROPONTHE50%RECORDED IN2020
2 6
2 7
STATE OF FLUX
2021 GLOBAL SRM RESEARCH REPORT
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