GOVERNANCE
39% of leaders have contract and performance management in place for less than half of their key suppliers
LEVEL OF SPEND AND BUSINESS CRITICALITY USED TO SEGMENT SUPPLIERS
FEWER THAN A QUARTER OF ORGANISATIONS HAVE FULLY IMPLEMENTED DIFFERENTIATED SUPPLIERMANAGEMENT STRATEGIES
Poor or inconsistent contract and performance management is no basis onwhich to build successful SRM
Fig 19. Have you implemented differentiated supplier management treatment strategies?
% of respondents
Fig 18. Which of the following criteria do you use to segment your supplier base?
Leader
Follower
Other
Other Follower Leader
%
0
20
40
60
80
100
55 57
53
Business criticality of products / services
Level of spend
GOVERNANCE OF SUPPLIER RELATIONSHIPS REMAINS LOW
24 23
21
20
Effective governance is at the heart of good SRM. It brings the interactions and relationship with the supplier under control. It also establishes the forums to begin developing the relationship to create more value. If suppliers are critical to a business or other organisation, there should be strong governance in place to direct the management of the relationship. Not all do, and there are marked differences in performance between SRM leaders and followers. Leaders are more likely than the other groups to have 90-100% of their critical suppliers under robust governance. However, they are much more likely to have 70-90% of their critical suppliers managed in the same way: 32% do compared with 20% of followers and 21% of others. Overall, little separates how leaders, followers and others perceive the effectiveness of their governance models. Designing an effective governance model is an early building block for SRM. CONTRACT AND PERFORMANCE MANAGEMENT IS LACKING Effective contract and performance management is a vital element of supplier governance. In this context effective means that all engagements are covered by valid contracts, approved by the appropriate authority; key contract terms and milestones are understood, monitored and acted upon; contracts contain appropriate SLAs and KPIs that are clearly defined and agreed; performance against KPIs is measured and reviewed regularly; and corrective and improvement actions are agreed and executed.
18
Market characteristics - difficulty in finding alternative supplier
10
10
6
3
Other (please specify in the comments field)
Yes - fully
Yes - partially
No - but we plan to
No - we have no current plans to do so
Potential for growth and value creation
HOWMANY SUPPLIERS DO YOU CONSIDER TO BE CRITICAL (TIER 1) OR ‘STRATEGIC’
Regulatory requirements
SNAPSHOT ANALYSIS Not all suppliers are the same. Knowing the differences between themand how they relate to the business is essential to defining how youmanage the relationship. Too few organisations consult with the wider stakeholder community on how to differentiate suppliers. At the same time, organisations that have fully implemented a differentiated supplier treatment strategy remain in theminority – even among SRM leaders. Perhaps the two results are linked: a lack of knowledge leads to a failure to differentiate between suppliers. Either way, shortcomings in governance make it more difficult for a supplier to contribute to strategic value.
Fig 20. Howmany suppliers do you consider to be critical (tier 1) or ‘strategic’?
% of respondents
Supplier appetite and capability towork collaboratively
Other Follower Leader
47
42
Supplier technological capability
33
28
27
27
Suppliers innovation capability
21
17
16
13
11
Your importance as a customer
8
3 3
3
Over 50
26 to 50
11 to 25
10 or less
Don't know
46
47
GOVERNANCE STATEOFFLUX 2017GLOBAL SRMRESEARCHREPORT
GOVERNANCE STATEOFFLUX 2017GLOBAL SRMRESEARCHREPORT
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