GOVERNANCE
PERFORMANCEMANAGEMENT Only 50% of firms say they have effective performance management in place for more than half of their key suppliers. As expected, leaders fare better with more than 8 in 10 reporting good performance management in place for more than 50% of their key suppliers. We remain concerned that companies trying to develop relationships to increase mutual value have not yet mitigated their exposure to operational risk with adequate performance management. for companies that are exposed to contractual and commercial loss and risk. Contracts should be live documents that create and maintain the framework for the relationship. They should not be consigned to a desk drawer never to be looked at again. Managing both parties’ obligations under the contract is a key aspect of good SRM. There is still significant room for improvement: Only 36% of companies have effective contract management in place for more than three-quarters of their key suppliers. Only36%offirmshave contractmanagement inplace formore than three-quartersof their keysuppliers
analyse residual risk, and put appropriate contingency and business continuity plans in place. The challenge comes after the contract is signed. Who is responsible for ongoing riskmanagement? What processes do they follow? What information and technology is there to support them? 48% Just 48%of companies believe they have effective riskmanagement in place for more than half their key suppliers STATEOF FLUXOPINION: Governance is essential if SRM is to fulfil its promise. The problem is embedding it in day-to-day work and ensuring it does not become a tick box exercise and fails to drive value. Here, an SRM process enabled by an integrated software application has an advantage. The right choice of technology can provide consistent governance processes and a ‘control tower’ oversight viewof SRMactivity and enable support or interventionwhen governance milestones aremissed. INTHENEXT SECTION... Nomatter how the value of SRM has been defined, howengaged the stakeholders are and how well structured the governance model SRM is still largely about the interactions between people. In the next sectionwe explore the state of people and skills development.
playing a supporting role. We see a steady state emerging in terms of companies’ preferences. Just over 70%of companies opt for SRMas an activity executed by procurement, either as part of a central function or a procurement teamembedded in thebusiness (Fig18) .BothSRMleaderand follower feedback isconsistentwiththispattern. THEFOUNDATIONSOFSRM As we saw on page 13, 60% of firms say they are managing supplier relationships to create value that goes beyond contractual obligations. However, this ambition must be built on the foundation of solid contract, performance and risk management, where we continue to find a significant deficit in good practice. CONTRACTMANAGEMENT Contract management shows a slight improvement compared with 2015, but it remains a cause for concern, especially Onlya thirdof all companiesconduct periodicstrategic relationshipreviews withkeysuppliers and less thanhalf hold performancereviews
SRM ISSTILLMOSTLYRUNOUTOF THEPROCUREMENTFUNCTION
50% of firms are failing to embed effective performancemanagement
Fig 18. Where are the majority of SRM practitioners in your business?
%
In the procurement function (central /group)
RISKMANAGEMENT Since we started asking specifically about riskmanagement three years ago, it has remained an area where organisations struggle. Only 48% of companies believe they have effective riskmanagement in place for more than half of their key suppliers. Most organisations with a reasonably well-developed category management and strategic sourcing capability assess risk when sourcing and selecting suppliers. If organisations are following their own procedures, they should
55
In the procurement function (decentralised/business unit) 18 In another function (decentralised / business unit) 17 In another function (central /group) 10
35 STATEOFFLUX
2016GLOBAL SRMRESEARCHREPORT
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