2024 GLOBAL SRM RESEARCH REPORT
GOVERNANCE SUMMARY OF INSIGHTS
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research has shown that Leaders are the strongest at this, with 85% assigning treatment strategies across all supplier segments, whereas optimal resource allocation is lower for Fast Followers (67%) and Followers (29%) across all segments. Do you have treatment strategies in place for all supplier types? Leader Fast Follower Follower Yes 85% 67% 29% No – treatment strategies partly developed 0% 3% 22% No – only for certain suppliers 15%% 28% 31% None 0% 1% 18% Governance models This year, we asked respondents to outline what governance activities were in place for critical and strategic suppliers. Governance practices support the delivery of an organisation’s treatment strategies, enabling successful supplier management. The responses in this area are mixed. Positively, 79% of respondents indicated that operational meetings were in place for critical and strategic suppliers, with 59% of respondents noting meetings happen at the executive level. However, we would expect to see a similar or higher proportion of all other governance elements listed for critical and strategic suppliers. Only 46% of respondents have a defined escalation process in place. Similarly, only 27% of all respondents selected that they had outlined a two-way RACI. Leaders appear ahead in this area (61%), while among Followers, it is only 14%. Regardless of an organisation’s maturity, having a RACI in place is essential for all critical and strategic suppliers. It can facilitate
relationship development for all stakeholders through defining and communicating the roles and responsibilities of both parties. For your critical and strategic suppliers, which governance elements do you have in place? 79% Regular meetings (weekly/ monthly/fortnightly/quarterly etc.) at the operational level 59% Regular meetings (weekly/ monthly/fortnightly/quarterly etc.) at the executive level 46% A defined escalation process 45% A meetings log capturing key discussion points and a record of attendees 43% An actions log, allowing for the effective tracking of progress against open initiatives 35% A consolidated library of contact information for key supplier stakeholders 27% Clearly defined, two-way RACI matrix outlining roles and responsibilities 13% No defined activities Contract, performance and risk Management When looking at governance activities, we split out contract, risk and performance management. However, all should include elements such as dedicated review meetings to discuss key issues, and ensure that key information is captured, whether it is in a dedicated solution or offline. A supplier management handbook aligned with treatment strategies is an effective way to ensure roles and responsibilities for all governance activities are recorded in one place, but only 44% of all respondents have developed one. When looking at the individual components, a key trend emerges: the lack of adoption of key governance elements outside of the Leader category, particularly in risk management. Contract Management Within contract management, there is a clear difference between Leaders and Followers. 89% of Leaders
Which criteria do you use to segment your suppliers? 83% Business criticality of products/services 83% Level of spend 51% Supply chain risk 38% Market characteristics – number of suppliers/competitiveness 35% Potential for growth and value creation 28% Supplier innovation capability 25% Sustainability 23% Supplier appetite and capability to work collaboratively 22% Supplier unique technological capability 21% Regulatory requirements 20% Reputational risk 19% Your importance as a customer 10% Diverse suppliers (inc small business/SME) 6% We haven't segmented our suppliers Treatment strategies Differentiated and proportionate treatment strategies for each supplier segment ensures that the appropriate level of governance is assigned. However, despite organisations recognising the importance of segmentation, understanding the importance of assigning treatment strategies is less apparent as only 42% of all respondents have developed them for all supplier types. On a positive note, 44% of respondents have treatment strategies in place for their diverse suppliers, showing that despite a small number of respondents selecting as part of their segmentation criteria, it is being recognised in treatment strategy creation. Treatment strategies help to optimise resource allocation. Our
We continuously emphasise that the first stepping stone to establishing good level of governance is to complete a segmentation exercise. It is therefore promising that this year, 94% of all respondents have done so. However, we do see a clear difference between the factors Leaders use to segment their suppliers, with the more limited number used by Fast Followers and Followers. This segmentation exercise should also be accompanied by the development of relevant treatment strategies, supported by a governance model that is used to deliver the treatment strategies and enable effective supplier management. Most organisations fail to fully utilise their segmentation output and create relevant treatment strategies, as indicated by the fact that only 42% of all respondents have developed treatment strategies for all supplier types. Similarly, aspects of good governance practices for critical and strategic suppliers fall short in most organisations: 79% of respondents have operational meetings in place but only 27% of respondents go further and create a two-way RACI which outlines roles and responsibilities for both internal and supplier stakeholders. Finally, when it comes to contract, performance and risk management for critical and strategic suppliers, Leaders are more likely to have dedicated meetings in place to discuss key issues with their suppliers. Risk management activities were considerably lower for Followers, despite the importance of risk management recognised by all respondents. Segmentation This year’s results mirror findings from previous years: segmentation is highly valued as a core governance process, with only 6% of all respondents stating that they have not segmented their suppliers, all of which are categorised as Followers.
However, this adoption across the maturity levels is largely based across the same factors, namely business criticality of products/ services (83%), level of spend (83%) and supply chain risk (51%). Additional factors to consider such as supplier diversity and sustainability - are not commonly cited by respondents but, on a positive note, they are growing in use, particularly among Leaders. Sustainability has been included as a segmentation criterion by a quarter of all respondents, with 58% of Leaders indicating it forms part of the process. Fast Followers (34%) and Followers (18%) are also to be adopting it, albeit at a slower rate. Furthermore, Leaders are also using the potential for growth and value creation (66%) and supplier innovation capability (63%) as factors, something that we are seeing Fast Followers start to adopt in increasing numbers (at 52% and 39% respectively). Supplier diversity on the other hand is used by 37% of Leaders within their segmentation process, but this does not look like it has yet spread to wider respondents, with only 8% of Followers and Fast Followers adopting it as a key factor. Returning to the overarching theme of this year’s report – Return on Relationships – the adoption of different factors beyond spend and criticality by Leaders in their segmentation model is helping drive an increased emphasis on innovation and collaboration with key suppliers – something we would expect to see mirrored by Fast Followers and Followers in the coming years.
Key statistics
of Leaders have developed treatment strategies for different supplier groups. 85% of Leaders have regular meetings with suppliers at the executive level. 89% of respondents selected that that had outlined a two-way RACI with their suppliers for supplier management activities. 27%
For a supplier management programme to maintain engagement and buy-in internally and from suppliers alike, it needs to demonstrate it is delivering value to customers and suppliers. Underpinning this, there needs to be robust and defined governance in place. Strong governance processes promote collaboration, continuous improvement, and value creation, and they should be consistent, repeatable and auditable.
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