GOVERNANCE
GOVERNANCE
Risk management in place for 75%-100% of suppliers, by maturity (2018-2021)
opinion State of Flux
Leader
Fast Follower
Follower
2018
50%
48%
15%
2019
69%
47%
18%
2020
53%
These treatment strategies need to resonate across all contract, performance, and risk management activities: > Any contractual obligations need to be proactively managed so that the contractual value is not eroded. > Strong and consistent performance is a prerequisite to the establishment of a collaborative and strategic relationship. That’s not to suggest that 100% performance is required before the conversation can start, but at the very least appropriate metrics need to be in place to establish a road map to achieving satisfactory performance. > Lastly, when it comes to risk, it is vital to establish a proactive identification and mitigation approach so that any disruptions are avoided, and the relationship is not impacted. Given the time-consuming nature of true supplier management and collaboration, a one-size-fits-all approach cannot effectively be applied to all suppliers, especially in the case of large supply chains. However, by undertaking and acting on segmentation and associated treatment strategies, organisations can put in place approaches that meet their strategic goals. This enables the right level of relationship with suppliers across their supply chain, while also delivering value for both parties. To learn more about how to set up appropriate governance for your supplier management programme, contact enquiries@stateofflux.co.uk
Mature supplier management programmes are driven by insights generated from effective contract, performance, and risk management. Every supplier management programme starts by completing a segmentation of the supplier base using a long list of carefully selected criteria, while considering the specific requirements driven by the industry an organisation operates in. The way organisations conduct this step is bound to change with supply chain resilience and third-party risk becoming important factors. Having a dynamic approach to segmentation and making sure that it aligns with your objectives, and continues to do so as these change, will be key. What then follows is typically the establishment of treatment strategies, which turn segmentation into action. It is at this stage that the component parts of supplier management come together to provide a cohesive approach focused on achieving desired objectives. These can range from basic transactional efficiency and low-cost-to-manage, right through to a genuinely strategic, collaborative relationship.
28%
13%
2021
73%
47%
13%
Additional means of documenting and adopting structured governance This year we included some questions about additional approaches to manage governance with strategic supplier relationships. We included these in the survey to find out how much they were being utilised in the market. The first was around the use of handbooks, which can be an extremely effective way to ensure that all stakeholders engage with and work alongside suppliers in a standardised, consistent way. This approach has been adopted to a good level among Leaders and Fast Followers, with 80% and 78% respectively responding that they had developed handbooks or work instructions that align with their treatment strategies. However, only just over half of the Followers (52%) said the same – showing that the use of handbooks has not yet passed down the maturity levels.
Another effective approach that can help support governance is the use of organisational charts to document your supply base and its key stakeholders. These charts help to identify who is to be engaged with, invited to participate, or asked to provide input for key contract, performance, and risk activities, as well as meetings. This is a work in progress among Leaders, 54% of whom have undertaken this for 75%-100% of their supply base. Among Followers just 3% have developed organisational charts for three quarters of their supply base, representing a clear opportunity for improvement.
HANDBOOKS CAN BE AN EXTREMELY EFFECTIVE WAY TO ENSURE THAT ALL STAKEHOLDERS ENGAGE WITH AND WORK ALONGSIDE SUPPLIERS IN A STANDARDISED, CONSISTENT WAY.
HAVING APPROPRIATE METRICS IN PLACE ESTABLISHES A ROAD MAP TO ACHIEVING SATISFACTORY PERFORMANCE.
5 2
5 3
STATE OF FLUX
2021 GLOBAL SRM RESEARCH REPORT
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