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What to measure? Companies have long wrestled with the challenge of measuring the impact of SRM, both in terms of capturing tangible and less tangible benefits, and also measuring the effectiveness of the process itself. Our research indicates there is still a focus on savings and cost avoidance, with a healthy balance across the key procurement metrics of cost, quality, risk and delivery. There is a positive trend to more integration of customers and stakeholders in the metrics, which procure- ment uses as indicated in the customer response and internal stakeholder feedback metrics. Another key observation is themeasurement of where the gap is widest in the ‘relationship’ and ‘innovation’ areas. For example, leaders are significantly ahead in using measures such as 360 degree relationship assessments, sustainability and CSR, innovation, joint initiatives, internal stakeholder feedback, and supplier satisfaction.
■ LEADER ■ FOLLOWER
Figure 5.11. Metrics employed to measure SRM success
COST AVOIDANCE ON TIME DELIVERY INTERNAL STAKEHOLDER FEEDBACK / SATISFACTION SAVINGS
NO METRICS USED NUMBER OF JOINT PROJECTS / INITIATIVES UNDERTAKEN NUMBER OF SUPPLIER IDEAS / INNOVATIONS IMPLEMENTED NUMBER OF SUPPLIER IDEAS / INNOVATIONS RECEIVED CONTRIBUTION TO SUSTAINABILITY / CSR OTHER FINANCIAL BENEFITS NUMBER OF DISPUTES / INCIDENTS / ESCALATIONS / ETC. JOINT VIEW OF RELATIONSHIP ATTRIBUTES (360 DEGREE ASSESSMENT) CONTRACTS COMPLIANCE LEVEL OF RISK SUPPLIER FEEDBACK / SATISFACTION QUALITY
0% 20% 40% 60% 80% 100%
The more the scope and potential of SRM is understood, the more challenging it becomes to measure success and the process itself. While it is important to measure both the process and the results, it is also important to keep it simple and avoid creating a ‘metric industry’. Select the key input and output meas- ures that fit the shape and objectives of your programme, and create a simple scorecard ensuring that what is reported is credible and validated, making sure key stakeholders get to know about it. This goes beyond just emailing a scorecard pack. It means taking the time to ensure they understand what SRM is doing for them specifically and for the wider business. To quote from the Sainsbury’s case study featured in this report: “For the first year or sowemaintained a 10% cost saving target for SRMactivity. It seems obvious in hindsight that this would narrow the focus of activity and drive the wrong behaviours. Recognising that SRM still needed objectives, we switched to a simple approach whereby each buyer has an objective to complete three SRM case studies”. – NEIL BRADFORD, HEAD OF PROCUREMENT, SAINSBURY’S
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