SUMMARY
Invest in people for SRM returns In striving for SRM returns, organisations tend to bypass people. Nearly a third of followers, the largest group in our sample, have no provision for SRM training at all. Meanwhile, there is a gap between how organisations view their skills requirements and the training they provide: 41% of organisations see communication skills as a priority for improvement, but only 17% invest in them. Only 46% of organisations have provided SRM training in the last 12 months, and 24% have not completed the stages necessary to develop effective training. There needs to be a focus on developing people, both inside and outside procurement. A lack of tools for the job Most organisations lack the optimum software and systems for SRM. Enterprise tools are focused on customers, marketing, finance or the transactional stuff in supply chains. Despite the vital importance in managing supplier relationships, 86% of organisations, do it with Microsoft Excel, which is not fit for purpose as enterprise software. Specific aspects of SRM, such as performance management and risk management, do get some investment, but only from the minority of organisations. As cloud computing eases the adoption of business software, there is a clear opportunity for organisations to up their game in technology support for SRM. Collaboration To get suppliers to innovate in areas that will benefit your organisation, you have to collaborate with them. The ultimate goal is developing joint business plans with suppliers. But only one in five (17%) have done this with more than half of their critical or strategic suppliers. There is strong evidence for returns for collaboration. It yields direct financial benefits and indirect or non-financial benefits as well as nurturing trust between suppliers and buyers – a key ingredient to supplier innovation. There are signs of improvement: 90% of SRM leader companies report increased levels of collaboration.
Summary While there has been some progress in achieving greater returns from SRM, key aspects of the activity need to improve, and potential remains unmet. There is an opportunity to develop supplier collaboration and innovation and, to achieve this, a pressing need to develop people and technology in support of SRM.
Growing value but more room for innovation In 2018 the proportion of organisations gaining financial benefits of more than 4% post contract value from SRM increase was 30%; in 2019 42%, a significant rise in return on investment in SRM. Still, the concrete returns do not mean all organisations create a value proposition for SRM. Only 47%, a slight drop on last year. Despite many industries under threat from disruption, supply-side innovation is only cited by 28% of organisations as a top three business driver for SRM. Even fewer though get returns: only 12% recorded supplier innovation as a non- financial benefit. Waning engagement in SRM should spark concern Senior management support for SRM has dropped from 75% in 2015 to 55% in 2019. Support from operational management also fell over the same period. But the benefits of getting the right people on board are clear: The leaders in our survey are seven times more likely to have strong and active support from senior management
than SRM followers. And, while 72% of suppliers support SRM, their engagement has also been falling. Procurement cannot deliver value through SRM alone – it needs to put work into getting others on side. Getting to grips with governance Among SRM followers, the majority of our survey sample, only 44% have a governance model in place for more than 50% of their critical or strategic suppliers. They need to get a grip on the measures and processes which will help them understand and manage suppliers. SRM leaders know this: 91% of them have a governance model in place for over 50% of their critical or strategic suppliers. Almost all companies now 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%) are also an increasing factor in their assessment. Segmentation is an academic exercise unless it’s linked to treatment strategies. While 98% say they segment suppliers, just 68% defined supplier treatment strategies.
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STATE OF FLUX
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