GOVERNANCE
PROCESSOWNERSHIP As with any process, ownership is key. Who will be accountable and
87%OFCOMPANIESHAVE SEGMENTEDTHEIRSUPPLIERS
MOSTSEGMENTATION ISSUBJECTIVE BUTDOESN’TSUFFICIENTLY INVOLVE THEBUSINESS
responsible for building and maintaining process excellence? For seven out of 10 companies this rests with the procurement department. The proportion of companies with a formal SRM process owner in place has increased since last year from 64% to 75% overall. Yet, the figure among leaders and followers is closer to 90%, indicating the link between more effective SRM and single-point accountability for process ownership. SEGMENTATION The majority of companies segment suppliers to better manage relationships with them. However, the approaches organisations adopt vary considerably in frequency and the criteria they apply to segmentation. The approach adopted is split between a slight majority of organisations where it is carried out as part of the category management process (46%), a legacy still driving post- contract supplier management treatment strategies. Whereas 41% of respondents have segmentation as part of the SRM process (Fig 16) . Most organisations divide suppliers according to how they want to work with them using a structured and more objective approach than was previously seen. In the past, segmentation was often a combination of personal preferences, historical precedents and guesswork. However, even now this more objective process is too often restricted to the procurement function whereas it would be more effective if it involved the whole business (Fig 17) . SEGMENTATIONCRITERIA While businesses rank spend and business criticality as the most important factors determining the type of relationship they seek, the appetite for evaluating future Segmentation is increasinglyreflecting growthandvaluecreation potential aswell asrisk andspend
Fig 16. Have you formally segmented you supplier base to determine your most important supplier relationships? Yes, as part of how category management is performed 41 % Yes, as a supplier management specific initiative 46 %
Fig 17. What approach to segmentation have you adopted?
%
An objective, structured process limited to procurement /supply chain
42
An objective, structured process involving functional business stakeholders
40
An objective, informal approach based on gathering stakeholder opinions 10 A subjective, informal approach based on executive opinion 4
No, we haven't segmented our suppliers 13 %
Another approach 4
Segmentation is too oftenrestricted to the procurement function whereas itwouldbemore effective if it involved the wholebusiness ORGANISATIONDESIGN Who leads SRM is divided somewhat along industry lines. In food and beverages and utilities, for example, procurement ismost likely to lead the process, whereas financial services tend to opt for amodel led by a business function, with procurement half conduct effective performance management. Second, three-quarters of businesses do not have documented roles and responsibilities for SRM. Confusion and ambiguity over roles and responsibilities leads to a loss of control and direction in supplier relationships. Good governance is at the heart of SRM. In some industries, failure to have adequate governance in place would constitute regulatory non-compliance.
relationships based on the potential value creation and growth has increased to 47% of respondents from 35% in 2015. Both a supplier’s potential contribution to growth and its willingness and appetite to collaborate are factors that are being considered by more respondents. GOVERNANCEMODELS The governance model describes the structures and rules put in place to manage relationships with suppliers. It sets out the key roles and responsibilities within the relationship, how often meetings should take place, what should be discussed, how performance should be measured and reported and when the relationship should be reviewed. We found that only a third of companies conduct periodic strategic relationship reviews with key suppliers and less than half hold performance reviews. While 39% of companies use a performance scorecard, only 16% use a scorecard designed to
assess the whole relationship. There are two further aspects of
governance that prompt concern from this analysis. First, less than a quarter of companies conduct regular risk reviews with their key suppliers and less than
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2016GLOBAL SRMRESEARCHREPORT
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