SIX PILLARS OF SRM
SIX PILLARS OF SRM
Six Pillars of SRM
One of the biggest challenges faced in changing the nature of supplier relationships to become more collaborative is developing the skills and competencies of the people involved. The skill set required to manage strategic supplier relationships is more akin to that of an account manager as opposed to the traditional procurement skill set. Companies that excel in SRM will have defined the various roles, gained a good understanding of the skills and competencies the roles require, assessed the current level of those skills and aligned training solutions. Read more about the approach that organisations are taking to develop the skills and competencies for SRM on pages 54 to 59.
The definition of SRM makes it clear that it’s not the same approach for all suppliers. An effective and efficient supplier management and governance approach is one that is differentiated based on the output from a segmentation process. Following segmentation the relationship with suppliers will be partly defined by the governance and oversight model that is adopted. This should include a proportional approach to contract, performance and risk management, as well as meeting and reporting structures. Read more about creating effective supplier management governance on pages 44 to 49.
State of Flux published its first SRM research report in 2009 under the title of ‘VALUE ADDED’ Supplier Relationship Management. The content referenced the building blocks of effective SRM namely, Segmentation, Accountability, Process and Governance and Value. Within a couple of years this initial thinking had been developed to create ‘The Six Pillars of SRM’ as a best practice model comprised of Value; Engagement; Governance; People; Technology and Collaboration. This has now become the standard for not only gathering information for this report, but also building broad SRM capability in companies seeking to drive more value from supplier relationships.
Successful companies excel at achieving and maintaining strong internal alignment and engagement – very successful companies extend this engagement to their key suppliers. To be an effective vehicle for delivering value, SRM requires strong and active support from three main stakeholder constituencies. Firstly the executive leadership team to secure sponsorship, strategic direction, role model behaviours and resources. Secondly your business and operational colleagues who interact with suppliers on a daily basis to implement changed ways of working and behaviours. Thirdly suppliers, whom you need to respond positively and work with you to achieve the necessary change.
A clear appreciation of the benefits that more collaborative supplier relationships can bring is fundamental to building the value proposition for SRM. Leading SRM programmes will explore value beyond the traditional remit of procurement savings and be looking to align strategic objectives and drive collaborative initiatives that capitalise on innovation, improve performance and reduce risk, culminating in tangible benefits. It’s important not to judge these benefits in purely direct financial terms. Value is what can also be achieved indirectly in the way that it serves as an enabler for the business to achieve its goals. Read more about how organisations
As management and decision making becomes more data driven organisations are becoming increasingly reliant on technology to support and enable their most important business processes. Supplier management is no exception and leading organisations are expanding their suite of IT tools to cover more of the contract and supplier management lifecycle. While these tools have existed in various forms for some time they are often fragmented and standalone. Integration and a wraparound of relationship management and collaboration technology is the future. Read more about how current technology solutions measure up to business needs on pages 64 to 69.
Execute the previous five pillars effectively and the chance that improved and more productive
relationships will emerge is relatively high. However, this outcome takes time and requires a helping hand. Leading organisations will invest more time and effort in reaching out to suppliers to build trust, exchange information, share plans and work together on common business challenges. The goal is become a customer of choice for your suppliers of choice. Read more about what organisations are doing increase collaboration and what benefits are being gained on pages 74 to 79. And how to improve on pages 80-83.
Read more about how effectively companies are engaging with stakeholders on pages 30 to 35.
define value and what they’ve achieved on pages 20 to 25.
16 STATE OF FLUX
2020 GLOBAL SRM RESEARCH REPORT
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