VALUE
The proportion of organisations establishing a value proposition for SRM fell slightly in 2019, down 3 points on 2018 to 47%. At the same time, drivers for SRM remain relatively constant : risk and cost reduction or avoidance remain the primary drivers, at 57% and 56% respectively. Meanwhile, 28% of organisations seek greater supplier innovation through SRM, a significant fall from 43% in 2018. Between 2018 and 2019, we have seen the proportion of organisations gaining financial benefits of more than 4% increase from 30% to 42%, a rise in return on investment in SRM. In terms of non-financial benefits, 41% of organisations have managed to reduce risk through SRM. However, success in innovation remains elusive: only 12% recorded innovation as a non-financial benefit. Summary
W hat does success look like? Most people think they know, but it is not always obvious. If projects are not based on the strategic goals businesses aspire to, they can never be said to succeed; nor can they fail. Organisations which create sustainable SRM programmes tend to build in value from the beginning. They have explored value in its broadest sense to understand, in detail, why they invest in managing supplier relationships, whether that is to reduce cost, boost revenue, improve margins, slash time to market, mitigate risks, innovate in product or process or find new markets. SRM can help with all these objectives, but unless project leaders define them from the start, they stand little chance of succeeding. Value proposition The value proposition is the vehicle which supports the business case for SRM and encourages executive buy-in. Our data shows the proportion of all companies having documented a value proposition is down on 2018, falling from 50% to 47%. But the importance of the value proposition is undiminished among
SRM leaders and fast followers. They are three times more likely to have a value proposition in place compared to SRM followers. Business drivers In a hierarchy topped by strategic objectives business drivers will be the strategies and initiatives that are expected to deliver those objectives. They will typically include increased sales, improved margins, speed to market, reducing costs, efficiency and productivity, capturing profitable market share, reducing risk exposure, innovation, improved sustainability etc. In the context of SRM the business drivers are what working collaboratively with suppliers should impact on. The business drivers that have been the focus of SRM have remained relatively constant over the last 10 years. Risk management and cost-reduction are more or less equal and are cited by just over half of respondents. Other business drivers, including internal
47% OF ORGANISATIONS HAVE A VALUE PROPOSITION FOR SRM 28% SEEKGREATERSUPPLIER INNOVATIONTHROUGHSRM 41%
and end-customer experience, innovation and services level
improvement, have all seen a slight fall in the number of organisations citing them as business drivers.
OF ORGANISATIONS HAVE REDUCED RISK THROUGH SRM
22
STATE OF FLUX
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