GOVERNANCE
Over half of followers do not have governance in place for half their critical / strategic suppliers Critical / Strategic suppliers (%) with governance models in place (leaders, fast followers, followers)
Treatment strategies There is little point in companies
segmenting suppliers unless they then use that information to manage suppliers in different ways. Differentiated strategies for the various tiers of segmentation not only make sense from a compliance and oversight perspective but also for the most efficient and effective deployment of resource and effort to maximise a return on your investment in SRM. Feedback from our research indicates that 68% of companies that have completed supplier segmentation have gone on to define differentiated treatment strategies aligned to the output. Having the right treatment strategy in place is fundamental to successful SRM and good governance. SRM leaders and fast followers are almost twice as likely than followers to have defined their treatment strategies. Effective governance Key roles and responsibilities defined, meetings with agreed terms of reference and oversight consistent with the supplier’s segmentation: they are all essential to effective governance. A significant majority of SRM leaders (91%) have what they regard as a fit for purpose 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%. The lower figure means a lack of oversight and compliance which could represent a significant risk to the organisation. The result does, after all, relate to critical or strategic suppliers that, by definition, will represent high risk, particularly important in highly regulated sectors such as financial services. The majority of organisations in our followers sample do not have an effective and efficient governance model in place to create structured and consistent engagement with suppliers to advance the SRM agenda. Financial services and IT and telecoms are the industry sectors that lead comfortably in terms of developing and implementing governance with the highest proportion of their critical and strategic suppliers, our data shows.
Leader
Fast Follower
Follower
9% Less than 50%
26%
56%
50%-75%
22%
33%
26%
75%-100%
69%
41%
18%
SRM leaders most likely to employ differentiated treatment strategies Treatment strategies (leaders, fast followers, followers)
Leader
Fast Follower
Follower
2% Don’t know 0% 7%
No
2%
10%
34%
Yes
96%
90%
59%
Such a failure of organisations to manage the basic contractual and performance aspects of their relationship with key suppliers not only represents risk to the business but also undermines the case for SRM with internal stakeholders.
44
STATE OF FLUX
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