2024 GLOBAL SRM RESEARCH REPORT
VALUE SUMMARY OF INSIGHTS
42
43
of Leaders have a defined and fully documented business case for supplier management. 92%
of Leaders have gained continuous improvement and innovation benefits from supplier management activities with their key suppliers. 87%
of Followers don’t know if their supplier management programme is delivering financial benefits. 75%
continuing the rise from 10% in 2022 and 30% in 2023. However, when we look at the equivalent percentage for Followers, it falls to 11%. There is a greater gap of respondents who have not realised a financial benefit. Just 8% of Leaders fell into this category whereas it was the case for 61% of Followers. When we look at the type of benefits gained from supplier management activities, risk management/reduction is the most commonly cited (by 65% of respondents), followed by cost reduction (53%), continuous improvement and innovation and cost avoidance (both at 52%). These results are largely driven by the Leaders – with continuous improvement and innovation being the most widely reported by this group at 87%, indicating that they are actively looking for and realising benefits above and beyond contracted value with their crucial and strategic suppliers. This percentage drops to 41% among Followers. Top benefits seen by Leaders from their supplier management activities with critical and strategic suppliers 87% Continuous improvement and innovation 84% Risk management/reduction 79% Quality improvement 74% Cost avoidance 74% Cost reduction 71% Service level improvement 66% Help achieving your ESG goals 63% Collaborative problem solving 63% Preferential pricing 61% Regulatory compliance
We see supplier management as a organisation-wide programme, for which change management, and bringing the business and suppliers alike on the journey is crucial. This lack of change management focus may be an underlying factor behind the year-on-year fall of Leaders in supplier management. How developed is your supplier management business case? Leader Fast Follower Follower Business case defined and fully documented, with accompanying communications plan created/ implemented 50% 35% 11% Business case defined and fully documented 42% 23% 12% Business case defined but not fully documented 8% 27% 18% Business case has elements missing/is in progress 0% 12% 25% Business case not yet defined 0% 3% 34% Tracking value A key facet of demonstrating success for a supplier management programme is tracking and measuring value delivered with critical and strategic suppliers over time. It is in this area within the Value pillar that we see the key differences between Leaders and Followers. Firstly, 92% of Leaders capture or monitor the financial benefits delivered above contracted spend for their critical and strategic suppliers. This figure decreases significantly to 25% when we look at the responses among Followers. Secondly, looking at the financial benefit delivered by their supplier management program, 50% of Leaders who report a benefit see more than 6% per annum –
factors such as legislation, should be aligned with the business case for supplier management. This is an issue that year on year continues to be an area of weakness for organisations. What are the most important business drivers for your investment in implementing supplier management in the next 12 months? 60% Cost reduction/avoidance 58% Risk management/reduction 36% More supplier innovation and continuous improvement 32% Supply chain resilience 21% Improving your internal/end customer experience 21% Service level improvement 20% Regulatory compliance Business case The supplier management business case plays the most important role of gaining buy-in to get supplier management off the ground. This case builds the foundations for a successful supplier management programme, and relies on understanding the key motivators for supplier management and ensuring it is aligned to the strategic needs of the business. Organisations need to understand and explore how they define value, to establish confidence amongst key stakeholders and gain executive buy-in. This year, the proportion of organisations having a defined and documented supplier management business case decreased from 44% in 2023 to 37% this year. Leaders continue to remain strong advocates for having a supplier management business case. 92% have a fully documented business case, whereas only 50% include an accompanying communications plan, compared to 70% in 2023. This fall impacts Leader performance in the Value pillar, which has dipped slightly overall this year.
When looking at the key drivers for supplier management, the responses most commonly cited year- on-year stay true – cost reduction/avoidance and risk management/ reduction in first and second place respectively – likely stemming from the geo-political events and wider risks that organisations face and the resulting cost challenges that accompany them. However, we see varying responses from Leaders and Followers on the extent to which they use a business case and tracking of benefits to measure the value their supplier management programmes deliver, and their ability to realise financial and non-financial benefits.
Organisations are failing to link their strategic needs to key drivers of supplier management and, as seen in recent years, developing an effective business case for supplier management continues to be a challenge for organisations. We have seen a decline in the results this year. Fewer respondents report having a defined and documented business case. Delving deeper, fewer Leaders have an accompanying communications plan sitting alongside their business case than last year. Despite this, value continues to be tracked, with an increased proportion of Leaders reporting value of over 6% per annum stemming from their supplier management programmes. A lack of understanding on what is fundamentally driving their supplier management programme, and not being able to link it to a robust and communicated business case, could explain why Fast Followers and Followers alike may find it harder to track and report value from their supplier management programme. They may not know what to measure and how best to undertake it. Most organisations continue to focus on determining value through cost savings / avoidance, but we see evidence of Leaders working to disrupt this cost narrative, looking beyond contractual obligations and measuring value arising from collaboration on innovation and new product development initiatives. Business drivers This year’s results reveal a similar pattern to previous years’ results, with cost reduction/avoidance and
risk management/reduction at the top end of organisations’ priorities for supplier management, reported by 60% and 58% of respondents respectively. The results are echoed among Leader responses. This result tells us two things: firstly, while risk continues to be a key driver for supplier management, cost management is increasing in importance again, having been pushed to second place in last year’s results. Secondly, some organisations, particularly among Leaders, are continuing to recognise the value of non-traditional drivers, some of which may be important to help deliver value beyond contractual obligations. The question to ask ourselves is whether organisations are aligning their strategy and key drivers to their investment priorities. Return on relationships highlights the importance of achieving success in innovation and continuous improvement with key suppliers, but organisations are not prioritising investment into this area; it has fallen by 5% in the last three years. Furthermore, when organisations were asked if legislation was affecting their investment into supplier management, 27% responded with ‘don’t know’. It is important for organisations to reflect on the different forms of value that supplier management and their relationships with critical and strategic suppliers can bring, and ensure those factors are fully considered and built into a business case for change. Investment priorities, along with any additional
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