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Risk and customer of choice business drivers have become more important.
For the first time since we started our annual research in 2009, risk has been identified as the most important business driver promoting an invest- ment in SRM. While cost reduction and cost avoidance remain priorities, customer of choice business drivers such as the need to secure the best supplier resource and account management focus have also become more important. The level and range of tangible benefits is increasing, with notable increases in supplier service levels, supply chain efficiency, impact on profit margins, risk reduction and cost avoidance. Leaders are almost twice as likely to be experiencing benefits in areas such as sustainability, access to the best supplier resource, and joint product or service development. All the evidence suggests that the benefits being delivered are well aligned to the business drivers, although this may well be serendipitous as little seems to be done to ensure a clear line of sight between SRM value and business objectives. Around 25% of respondents report post contract SRM related benefits to be worth 6% or more of the contract value. However, capturing and reporting benefits remains a challenge, with 32% of respondents not knowing what the benefits are. For the most part, there seems to be a good understanding of the value that SRM provides suppliers. In fact, in many cases it seems the value received by the sell side is more than the buy side think. Customer of choice discretion is certainly exercised by suppliers, as evidenced by the descriptions of the benefits received on the buy side and provided by the sell side.
Highlights Over 90% of respondents believe risk is either important or very important as a business driver for SRM. It’s ranked number one by financial services, utili- ties and FMCG industry sectors. Leaders are twice as likely to be receiving customer of choice type benefits. 34% of leaders are reporting post contract benefits in excess of 6%. Financial services and man- ufacturing (both 25%) report benefits in excess of 6%. The top three benefits reported are: cost reduction / avoidance, risk reductionand service improve- ment. These correspondwith the top three business drivers. Only 15% of buy side com- panies regularly share SRM benefits with suppliers. Customer of choice benefits are real and reported by both sides.
Business drivers and value best practice A value proposition or business case for SRM, capturing the full range of value, has been devel- oped, socialised and accepted by all relevant stakeholders. A clear understanding of the realistic value potential of SRM and alignment to key business drivers has been established and is realigned when business drivers change. Capability to capture and report on both direct and indirect benefits has been developed. A commitment and mechanism to share the benefits of collaborative SRM initiatives is in place. Activities to drive value are in place and embedded in a jointly agreed account plan. Examples could include: › › Continuous improvement workshops › › Site visits › › Innovation forums › › Value release activities
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