SECTION THREE Supplier Management 3 HIGHLIGHTS SECTION SUMMARY
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The days when organisations could keep their suppliers at arm’s length and remain competitive are gone. Success in today’s business world requires greater collaboration between organisations and joined-up efforts. Effective supplier management depends on the importance of each supplier and the majority of organisations we surveyed do segment their suppliers into different categories. However, 80% do not move to the next level in terms of putting in place supplier management governance frameworks and processes. Currently, the main supplier management activity is sharing information such as demand and forecast data, market knowledge and performance data. Little discussion occurs on more strategic matters such as business plans and alignment, and we recommend that organisations start having strategic discussions with their top suppliers. On the positive side is the fact that more than 6 out of 10 companies say they work collaboratively with their suppliers to either reduce costs or increase innovation. Joint activity on mitigating risks in the supply chain is low, reported by just 29.2% of the survey sample. We do not see a better approach for supply chain risk management than engaging in closer relationships with suppliers. Shared risks and issues logs, joint business continuity plans, clear escalation paths and so on can make a supply chain more resilient for all its members. From our survey, soliciting feedback from suppliers has been noted to be low compared with other activities that organisations undertake within their supplier management programmes. We believe that a two- way approach has to be employed, at least with strategic suppliers, and that there is a big opportunity for organisations to start working more closely with their suppliers and leverage those relationships.
• Eight out of 10 organisations segment their suppliers, 65.1% of these undertake this exercise on at least an annual basis. • The majority of organisations include from 11 to 25 suppliers in their strategic segment, which accounts for 51-75% of the overall third-party spend. • 82% of organisations do not have supplier management governance and processes in place. • The main supplier management activity (for 71.9% of the organisations) is sharing information with suppliers. Information sharing includes demand and forecast data, market knowledge and supplier performance data. • Six out of 10 organisations collaborate with suppliers on cost savings and innovation initiatives. However, only half as many engage in joint risk management efforts. • One in five organisations solicits feedback from their suppliers and only 5.6% conducts 360-degree assessments. • The majority of organisations do not share strategic information with their suppliers. • 64.8% believe that technology supports supplier management activities adequately.
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