VALUE
90% of leaders have a value proposition for SRM; only 40% of other businesses do 95% of SRM leaders report both financial and non-financial benefits 46% of leaders achieved financial benefits of more than 4%after signing supplier contracts
One third of survey respondents see the value of SRM, not just in direct supply-side benefits of reduced cost and risk, but also in the broader corporate objectives of innovation, competitive advantage and customer experience. However, discounting SRM leaders and followers, only half of organisations are able to build a value proposition to link SRMwith broader benefits. Leaders and followers are seeing SRM’s benefits spread outside the core goals of reduced cost and risk to include innovation, speed to market and access to scarce resources. The remainder are clearly at a disadvantage in their market place. SUMMARY
COMPETITIVE ADVANTAGE BECOMES THE THIRD RANKED DRIVER FOR SRM
Fig 4. Which business driver is themost important reason you are implementing / developing SRM in the next 12months?*
%
Cost reduction / avoidance
21
Riskmanagement / reduction
20
Gaining competitive advantage in yourmarket
15
TYPICAL SUPPLY-SIDE BENEFITS ARE NO LONGER THE PRIMARY MOTIVATION FOR INVESTING IN SRM Managed in the right way, suppliers can determine how quickly a business gets products to market. In doing so, they can provide a competitive advantage, justifying investment in SRM. But is it worth the effort? Although time to market is one of the many potential benefits of SRM, it is not a high priority for all businesses at all times. Exactly which business objective SRM should support will depend on the business priorities. By developing a deep, up-to-date understanding of these priorities, procurement teams can determine the kind of value SRM should create, ultimately providing a business case and sustained investment. Looking at a broad sweep of business drivers, State of Flux’s 2017 survey shows cost avoidance and risk reduction were the most likely benefits procurement teams expect to derive from SRM. For the first time, we asked respondents to choose just one business driver as their most important, and their answers are particularly interesting. A quarter of respondents say they either want to gain competitive advantage in their market or improve internal or external customer experience. In effect, they are saying that typical supply-side benefits no longer constitute the primary motivation for investing in SRM.
VALUE PROPOSITION REMAINS ABSENT IN TOO MANY SRM STRATEGIES The business drivers for SRM are followed by the value proposition. The value proposition creates the link between an organisation’s strategic and performance objectives and the vital work being carried out by suppliers. Using the value proposition, SRM teams can identify all potential benefits, not just in traditional supply-side value but also the broader value that the organisations can achieve jointly. The value proposition can be used as the ‘sales pitch’ for SRM and the basis of any business case to invest in process, people and technology. It is also a clear leader attribute. Nearly nine out of 10 leaders in SRM have a value proposition for the strategy compared with around seven out of 10 followers and four out of 10 other businesses. Leaders and followers are twice as likely than other organisations to have developed and documented a clear value proposition and/or business case for SRM that links it to the organisation’s strategic and performance objectives.
Improving your internal / end customer experience
10
Improving supply chain efficiency
9
More supplier innovation
8
Regulatory compliance
46% of "other" businesses and 40%of followers do not know the financial benefits of SRM SNAPSHOT ANALYSIS SRM leaders’ approach to value set themapart from the rest of the field. They aremore likely to create a value proposition andmore likely to see both financial and non-financial benefits from their work. And the scale of the financial benefits they accrue is also much greater than any other group. Defining value in an SRM plan is vital to its success.
5
Service level improvement
4
Quality improvement
2
Improve speed tomarket
1
Achieving CSRgoals
LEADERS AND FOLLOWERS SEE NON-FINANCIAL ASWELL AS FINANCIAL BENEFITS IN SRM
1
Other
Whether or not organisations have a clear value proposition for SRM, it is still vital they capture and report benefits. This applies as much to non-financial benefits as it does to financial benefits. In fact, as broader value becomes more of a business driver for SRM being able capture non- financial benefits becomes more important.
6
*This analysis is for all respondents
18
19 VALUE STATEOFFLUX
VALUE STATEOFFLUX 2017GLOBAL SRMRESEARCHREPORT O FL X GL AL SR RESEARCHREPORT
2017GLOBAL SRMRESEARCHREPORT
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