SUMMARY
CALLTOACTION We have based this year’s report on the theme of entrepreneurial procurement which we see as a way of describing the behaviour needed to help business accelerate growth and grasp new opportunities from their interactions with suppliers. The following six recommendations are focused on these objectives.
SUMMARY What have we learned? Businesses have become dependent on their suppliers not only to manage cost and risk, but also to spur future growth. Through the results of our research we have revealed insights that organisations can learn from to help extract the greatest mutual benefit from supplier relationships. The most important, we think, are as follows:
→ 1. Get the SRM value
→ 3. Governance is about growth
→ 5. Use technology to promote behavioural change
proposition in line with business strategy
Entrepreneurial procurement aims to bring broader value to the business, not just in contract price and supplier performance, but in engineering new processes and creating newmarkets from innovation among suppliers. Procurement should become the conduit for the business to access that supply-side value. → 2. Engage stakeholders by saying what you can do for them Organisations getting the value proposition right will find it easier to engage stakeholders – both senior executives andmiddlemanagement. Since the biggest barrier is other business priorities, showing how you can address these challenges will help engagement. Real competitive advantage will come when discussions between stakeholders across organisations inspire development of new products or access newmarkets.
Good governance supports entrepreneurial thinking because it frees up the organisation to be creative and look for new sources of value as opposed to spending unnecessary time and resources firefighting or stumbling over operational challenges. Effective segmentation will identify the suppliers who are more likely to be the source of future competitive advantage.
Entrepreneurial SRM requires information to bemanaged and
accessible to quickly take advantage of new prospects. Technology improves the speed of decisions, enabling the organisation tomove quickly asmarket opportunities present themselves.
TECHNOLOGY IS THEWEAKEST PILLAR OF SRM When creating SRM reports, 86% of organisations use Microsoft Excel.
NO ONE LIKES HOMEWORK, BUT IT STILL NEEDS TO BE DONE Even among SRM leaders, 29% of organisations do not have strong governance in place for more than half of their strategic suppliers. That matters. Poor understanding of suppliers makes it difficult to know which relationship is best for which supplier: only around 23% of leaders and followers have fully differentiated supplier management treatment strategies. If supplier relationships are to fulfil strategic objectives, organisations need to work on governance.
THE VALUE OF SRM IS IN INNOVATION, COMPETITIVE ADVANTAGE AND CUSTOMER EXPERIENCE Yes, there are benefits in cost, risk and operational performance, but SRM leaders are seeing its benefits spread outside these core goals to include innovation, speed to market and access to scarce resources. The remainder are clearly at a disadvantage in their marketplace. Remember, 46% of leaders see post- contract financial benefits greater than 4%, much more than any other group. ENGAGEMENT IN SRMREMAINS A CHALLENGE Overall, strong and active engagement in SRM from the senior management team has fallen. Yet engagement is a clear predictor of success: SRM leaders are three times more likely than followers to engage the senior team. The main barrier to engagement across all groups is that other priorities seemmore important than SRM. This brings us back to value: if procurement teams show how SRM addresses these ‘other priorities’, engagement improves.
That says it all. Good as it is, Excel is not the enterprise tool SRM needs to collect, analyse and present data from across the organisation. Overall, 43% of respondents say SRM is poorly, or very poorly, supported by technology. Although all groups in our study struggle with technology, the best performers in SRM are much more likely to see it as part of their SRM strategy. SRM LEADERS GET MORE SUPPLIER INNOVATION THAN ANYONE ELSE Being a customer of choice helps relationships develop, reduces risk and nurtures supplier innovation. Every organisation in the leaders group is actively seeking innovation, and they are more likely than any other group to get it. Among leaders, 17% report they greatly benefit from supplier innovation and 38% report that benefits have been creditable. More collaboration and innovation paves the path to real business value. What can organisations do about their SRM performance? Read our call to action to find out.
→ 4. Invest in people
→ 6. Build collaboration on mutual benefits
Organisations should construct an approach to training and development that reflects the SRM skills that aremost lacking, such as strategic thinking, influencing and communication. The entrepreneurial approach requires the business to identify those with an eye for an opportunity who have tenacity and the confidence to knock on doors to facilitate discussions. At the same time, they need to be able to exercise the right level of control.
For supplier collaboration to fulfil its promise, theremust be something in it for both sides. Fromour research, we’ve seenmost organisations failing to createmutual benefits. As amass of services and products become digitally enabled or digitally enhanced, business thinkers see the greatest opportunities for those who can form new alliances at speed. Those willing to put a little in will see a lot in return.
PEOPLE AND SKILLS SUFFER UNDERINVESTMENT
Organisations seem prepared to hand over huge sums of money to suppliers to provide vital products or services, but invest little in the skills required to manage those relationships. A significant proportion of respondents, 38%, have not provided any SRM training at all in the past year. Where organisations do invest in skills it reflects a poor understanding of the SRM role: training in negotiation skills is the most popular option, but negotiation is ranked 11 th in skills most important for SRM.
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STATEOFFLUX 2017GLOBAL SRMRESEARCHREPORT
2017GLOBAL SRMRESEARCHREPORT
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