GOVERNANCE
Summary
While the strongest of the six pillars, governance can be a struggle for many organisations. Most segment suppliers based on spend and criticality, but growth and innovation (42%), risk to reputation and sustainability (39%), and the competition in the supply market (38%) also factor in their assessment. Among SRM leaders, 91% have a governance model in place for over 50% of their critical or strategic suppliers. While this clearly leaves room for improvement, only 70% of fast followers are reaching that level and for followers the figure is just 44%. Our research shows no increase in the proportion of companies with effective contract and performance management or risk management in place for more than three quarters of their critical suppliers. The financial services sector is most likely to have effective contract and performance management in place: almost 60% report good practice implemented with more than 75% of critical suppliers, significantly higher than other sectors.
S RM governance is a and transparency is maintained. Organisations can best achieve good governance by working in partnership with their critical and strategic suppliers, so both parties fulfil their respective roles and responsibilities. Good governance starts with segmentation. Currently, the vast majority of organisations carry out segmentation (over 98% according to our latest figures). Mostly, this is applied to a legacy supplier base. But in best-practice SRM it can be part of the go-to-market sourcing plan in which the type of relationship becomes one of the selection criteria. In addition, conducted thoroughly and asking the right questions, segmentation can framework of rules and practices by which oversight, accountability, fairness, contribute to better supplier strategies by identifying risks and opportunities not previously considered. Over the years, companies have progressively expanded their segmentation criteria, whereas now
only 4% of companies use just spend, and 8% use just spend and business criticality. The vast majority now use a range of criteria designed and weighted to reflect their business priorities. In addition to spend and business criticality, the most frequently used criteria include: suppliers’ potential to add to growth and innovation (42%), risk to reputation and sustainability (39%), and competition in the supply market (38%).
42% OF ORGANISATIONS USE GROWTH AND
INNOVATION IN SUPPLIER SEGMENTATION CRITERIA 55% OFFOLLOWERSDONOT HAVEGOVERNANCE IN PLACEFORHALFTHEIR CRITICALSUPPLIERS 27% REPORT EFFECTIVE RISK MANAGEMENT IS IN PLACE WITH MORE THAN 75%OF CRITICAL SUPPLIERS
There is little point in companies segmenting suppliers unless they then use that information to manage suppliers in different ways.
42
STATE OF FLUX
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