2024 GLOBAL SRM RESEARCH REPORT
DECODING SUCCESS
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“Embracing this paradigm shift ensures procurement’s continued relevance and resilience in an era where reputation and relationships reign supreme.”
becomes integral in this context. The shift from a product-centric approach to one that prioritises relationships aligns with the core of SRM, emphasising the strategic importance of understanding and maximising the value derived from supplier interactions. 4. The power of networks and collaborative ecosystems The reputation and relationship age thrives on interconnected networks. Similarly, in procurement, creating collaborative ecosystems with suppliers is imperative. Here, knowledge sharing, joint problem-solving, and continuous improvement are not just encouraged but integral to
5. Transparency and ethical sourcing as pillars of reputation Transparency and ethical practices are the hallmarks of the reputation and relationship age. Procurement professionals should actively seek suppliers who align with stringent ethical standards and transparent business practices. The reputation of suppliers, in this context, directly influences the reputation of the entire supply chain.
This approach fosters a collaborative and mutually beneficial environment.
Customer of choice Customer’s of choice typically get preferential treatment compared to others for reasons other than sales and revenue. They may get early access to new opportunities for growth, as well as benefit from reduced risk and cost. Being a customer of choice comes from consistently building strong relationships with suppliers and fostering a reputation for fair and transparent dealings. And it is in this way that customers of choice achieve greater value. In the reputation and relationship age, being the customer of choice translates to being a trusted and valued partner in the supplier network. Procurement now finds itself at a pivotal juncture. Beyond the confines of transactional processes, the focus has shifted to cultivating robust supplier relationships, building trust, and aligning with ethical and transparent practices. Embracing this paradigm shift not only positions procurement as a strategic player, it also ensures its continued relevance and resilience in an era where reputation and relationships reign supreme. The principles of SRM and the concept of being the customer of choice, championed by State of Flux, serve as guiding beacons for procurement professionals navigating this dynamic landscape. In this age of interconnectedness, where reputation is currency, procurement has the opportunity to redefine its role and contribute to the broader success of organisations. As companies start to recognise the strategic importance of supplier relationships, procurement emerges as a key player in shaping this collaborative and mutually beneficial environment.
Decoding success
A guide to calculating your Return on Relationships
2. Revenue preservation » Formula: Revenue preserved ÷ total revenue x100 » Assess how supplier relationships contribute to maintaining consistent production and service levels, preventing revenue loss during disruptions 3. Innovation impact » Formula: Innovation impact ÷ total R&D spend) x100 » Quantify the influence of supplier
To prove the value that strategic supplier management programmes can bring to businesses, procurement and supply teams need to be able to comprehensively calculate the return they get for those supplier relationships. ‘Return on relationships’ (ROR) is a multifaceted metric that goes beyond the immediate benefits of cost savings and efficiency, in other words the traditional financial lens of return on investment (ROI). Instead, it seeks to measure the holistic impact of supplier relationships on an organisation’s bottom line, encompassing factors such as risk mitigation, innovation, operational efficiency, and strategic alignment. Working out the true return on relationships involves a nuanced approach. It covers both quantitative and qualitative aspects of interactions with suppliers, encompassing financial, operational, and strategic considerations.
It pulls together the impact of individual supplier relationships, performance and governance and looks at the return on the investment for the whole programme. Here we explore key components and methodologies that will help to decipher and determine the real returns derived from supplier relationships. Quantitative metrics 1. Cost savings and efficiency » Formula: (Cost savings + efficiency gains) ÷ total spend x100 » Identify and quantify cost savings achieved through negotiations, bulk purchasing, and process efficiencies. » Measure the impact of
In the reputation and relationship age, organisations are scrutinising suppliers not just for their product quality but also for their ethical standing. Transparency in sourcing practices and adherence to ethical standards become critical considerations, and procurement practices should align with the broader ethical values of their organisation. 6. Insights on SRM and being the customer of choice The principles of SRM emphasise the strategic importance of understanding and maximising the value derived from supplier interactions. Becoming the customer of choice echoes the ethos of the reputation and relationship age, where organisations prioritise relationships over mere transactions.
enhanced competitiveness and resilience in a rapidly changing business landscape. As companies navigate the complexities of today’s business world, the power of networks and collaborative ecosystems in procurement cannot be overstated. The interconnectedness of suppliers and organisations fosters an environment where collective innovation and problem-solving contribute to sustained success. This interconnectedness can be used to harness success for buyers and suppliers, but also risks damaging the reputation of both should problems arise.
collaboration on product/ service innovation, market competitiveness, and the organisation’s overall innovation agenda.
Qualitative metrics 1. Risk mitigation and resilience » Evaluate the effectiveness of supplier relationships in identifying, mitigating, and managing risks.
streamlined processes on operational efficiency and cost reduction.
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