VALUE
VALUE
The most important business drivers for investment in implementing/developing SRM in the next 12 months (all respondents)
In reality the initial business case for SRM is about establishing a confidence level amongst key stakeholders that the investment in time, effort, training, technology and so on will be worth it. Therefore the value proposition plays a vital role in broadening the definition of value and getting SRM off the ground to start the journey. This year the proportion of all companies having documented a value proposition has increased compared with 2019 (47%) to 54%. Not surprisingly Leaders are strong advocates of the value proposition as the basis for the SRM business case. A total of 88% have one documented compared with 68% of Fast Followers and just 36% of Followers. The Leaders figure is slightly lower than 2019 (90%) partially explaining why Leader performance in the Value pillar has dipped slightly this year. When asked about the barriers encountered trying to roll out SRM, one in three companies indicated that slow implementation and realisation of benefits was a challenge. Almost the same proportion said that an inability to quantify and measure benefits was a problem. This points to the complexity of tracking benefits across such a wide range of potential value. This is supported by the fact that more than 40% of companies running SRM programmes remain unable to quantify the value being delivered.
The procurement conversation with the business has been transitioning from a focus on savings to a conversation about value for some time. As suppliers have been increasingly recognised as an asset capable of creating competitive advantage, the C-suite and wider business have become more tuned in to the conversation. While this might vary value is now being discussed and explored in its broadest sense: from innovation to sustainability, and from quality improvement to customer experience, value is the business driver for SRM. The changing definition of value is illustrated by the emergence of risk management as a primary business driver for 58% of respondents. Supply chain value has been re-examined in the light of the Covid-19 pandemic, with the value of supply chain resilience recognised as key to many companies’ ability to navigate the crisis. Supplier innovation continues to feature as a key driver for 44%. An SRM value proposition is developed by 54% of companies. Difficulty tracking benefits is clear as around 40% of respondents are unable to quantify them. Financial benefits in excess of 4% are estimated by 41%. Non-financial benefits remain strong with the top one being reduced supply chain risk. Summary
Helping achieve your responsible business and sustainability goals
Risk management/reduction
58%
14%
Cost reduction/avoidance
Improving your end customer experience
50%
More supplier innovation and continuous improvement
14%
Improving your internal customer experience
44%
Supply chain resilience
13%
32%
Faster speed to market
Quality and service level improvement
8%
25%
Other
Improving supply chain efficiency
4%
14%
Regulatory compliance
14%
the Financial Services sector, where we know that risk management is a key SRM business driver. The second marked finding is the keen interest companies in North America have in driving more supplier innovation. This focus appears to bring a dividend in that 16% of North American respondents report increased supplier innovation as a benefit compared with just 11% in Europe.
Business drivers
For the past few years we have seen the emergence of risk management to become regarded as an aspect of SRM value equal to, if not greater than, cost reduction. Given the circumstances that prevailed in 2020 it’s unsurprising that risk management and supply chain resilience have consolidated their position as important business drivers for SRM. Some regional variation in business drivers Some interesting regional variations emerge when looking at what companies in Europe, North America, and Australasia and believe to be their most important business drivers for SRM. The two most significant takeaways from this analysis reveal risk management being seen as more of a priority in Europe. We can only speculate as to whether Brexit considerations by UK companies play a part in this figure. There was also a higher proportion of respondents in
SRM business drivers – regional variation (all respondents)
58% INCLUDERISKMANAGEMENT ASATOPTHREEBUSINESS DRIVEROFSRM 32% STATESUPPLYCHAIN RESILIENCE ISONEOFTHEIR THREEKEYMOTIVATORS 50% STILLPRIORITISECOST REDUCTIONASADESIRED OUTCOMEOFSRM ASLIGHT
Risk Management
Cost Reduction
Supplier Innovation
Supply Chain Resilience
Quality & Service Improvement
80%
The Value Proposition
Snapshot analysis
Any discussion about investing in an SRM programme will very quickly get to the ‘value proposition’, or as many see it, the basis for creating a business case to secure executive buy-in and therefore access to required resources.
60%
The problem with cost reduction within the context of SRM is that for so long the term has had two definitions. One being tactical market and negotiation-driven price reduction, and the other a more collaborative approach to reducing ‘bad cost’. Both are valid approaches to reducing spend with third parties although it’s the latter that is more compatible with SRM and more sustainable over the long term.
40%
20%
53% of North American companies rank supplier innovation as a top three business driver for SRM.
DROPONTHE56% RECORDED IN2019
0%
Global
Europe
North America
Australasia
22 STATE OF FLUX
2020 GLOBAL SRM RESEARCH REPORT
23
Powered by FlippingBook