VALUE
VALUE
A total of 15% of Leaders and 13% of Fast Followers said they believe their supplier management programme delivers financial benefit of more than 6%. In the case of Followers, just 5% report benefit of more than 6%. When we look at the subsequent benefit groupings discrepancies become more apparent between the top two maturity levels. A total of 34% of Leaders saw their benefits range between 4% and 6%, whereas the same response among fast Followers was less than half that amount (at 15%). Comparing this to last year’s results, the total percentage of each respondents who were able to identify the benefit (i.e., any response aside from ‘Don’t know’) has decreased. Leaders have dropped from 81% in 2020 to 76% in 2021, while Fast Followers have decreased from 72% to 65% in the same period. Followers saw the smallest decrease, from 44% to 42%. Interestingly, of those identifying gains, the percentage benefit realised has also dropped. For example, among Leaders, in 2020, 48% of respondents saw benefits above 4%. While a similar amount (49%) indicated the same response this year, the proportion of those who saw benefits over 6% decreased from 25% to 15% – more passed into the 4%-6% bracket.
In which of these areas have you seen financial or non-financial benefits from your supplier management programme/activities so far?
Which of the following benefits would you say your organisation has derived from the suppliers engaged in your supplier management programme in the last 12 months?
opinion State of Flux
Leader
Fast Follower
Follower
Leader
Fast Follower
Follower
Risk management/reduction
Increased commitment and support from suppliers' senior management
85%
78%
66%
63%
52%
Cost reduction
39%
73%
Collaborative problem solving
67%
53%
54%
42% 42%
Supplier innovation
64%
At the start of the Covid-19 pandemic, we all appreciated the importance supply chains played in our day-to-day lives. You didn’t have to work in the profession to witness which supermarkets had succeeded in stocking vital supplies or who had access to vital PPE. The increased understanding within businesses (as well as among the general public) – together with the lessons learnt from the early disruptions – has put the spotlight on the need to establish more resilient supply chains, while simultaneously reducing their exposure to risk. In our view, collaboration between customers and suppliers, and knowledge of what constitutes mutual value for both parties, is the key to unlocking a wide range of financial and non-financial benefits throughout the lifecycle of the relationship. It is true, that a lot of organisations are struggling to quantify and report benefits generated from their supplier management programmes. In our view, this shouldn’t be the case. Any post-contract savings are generated by the relationship you have established with the strategic supplier in question. If the partnership is founded on the principles of collaboration and mutual advantage, then savings are more likely to be derived from sustainable cost reduction and the relationship is likely to develop and continue to generate value. Therefore, the quantification and reporting of any material benefits should be straightforward; anything achieved post-contract should count towards the supplier management programme’s success.
If the foundations of supplier management exist and a structured approach is followed, then there is significant value to be generated from partnerships with strategic providers beyond the traditional remit of procurement savings. We've listed examples of those throughout the pages of this report. Among them are reduced risk, increased resilience, more aligned objectives – which can lead to growth opportunities, improved sustainability and community contributions, an increased reputation and even a boost to shareholder value. Organisations with mature supplier management programmes are already reaping the rewards gained through establishing collaborative relationships with their strategic suppliers. In their case, value extends beyond the traditional remit of procurement savings and cost avoidance; it particularly includes benefits such as risk reduction, increased innovation, and continuous improvement and last but not least increased supply chain resilience.
Proactive ideas for continuous improvement
55%
35%
51% 51%
Cost avoidance
64%
33%
59%
50%
Improved account management
48%
Supply chain efficiency
53%
52%
44%
49%
29%
An increased willingness to accept and manage risk
Improved end customer experience
46%
48%
31%
40%
21%
24%
General increased commitment ('going the extra mile')
Improved speed to market
30%
45%
11%
47%
6%
37%
Supplier-derived benefits
Improved profitability
Priority access to scarce materials and/or manufacturing capacity
Examining the benefits organisations have derived from the suppliers engaged in their programmes over the past 12 months, increased commitment and support from suppliers’ senior management was the top answer among Leaders (cited by 63% of respondents). This response was came second among Fast Followers (with 52% flagging it) and third among Followers (with 39%). The two groups lower down the maturity scale both identified improved account management as the key benefit to come from having suppliers engaged in a supplier management programme (with 53% and 44% respectively).
28%
9%
40%
10%
30%
25%
Growth of sales and revenue
21%
Access to market intelligence
12%
QUANTIFICATION AND REPORTING OF MATERIAL BENEFITS SHOULD BE STRAIGHT FORWARD; ANYTHING ACHIEVED POST-CONTRACT SHOULD COUNT TOWARDS THE SUPPLIER MANAGEMENT PROGRAMME’S SUCCESS.
30%
8%
20%
18%
Preferential price that was not an existing contractual obligation
27%
35%
26%
Best practice insights
16%
26%
15%
2 8
2 9
STATE OF FLUX
2021 GLOBAL SRM RESEARCH REPORT
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