2023 GLOBAL SRM RESEARCH REPORT
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Adapt to survive Procurement’s got a problem on its hands, and (mostly) it doesn’t even know it. The majority of key business processes are provided by an external company. Consider
This is concerning. Organisations are only as good as their worst supplier. Yet not nearly enough procurement functions are conducting supplier management or doing it to the extent that they can assure their firms they are helping their suppliers to be the best they can be. Once the supply base is segmented, all will need suitable treatment strategies including a playbook covering roles and responsibilities that are embedded into job roles, training, and consistent behaviour. Only then can procurement teams truly say they are leaders in this field. Procurement can and will still add value at the start of any process, particularly in assessing a customer’s wants versus their needs, but managing the extended enterprise is where our brand now needs to be. Finally, I’m incredibly grateful to the 509 individuals, from 350 organisations from across the globe, who participated in this year’s research. Huge thanks also to the companies and individuals who shared their expertise and experience for articles within these pages. I hope you find them insightful and inspiring.
IT, 10 to 15 years ago departments would have had massive teams of developers in house. Now, the role of the CIO is to manage relationships with large suppliers to whom the work has been outsourced. And with that comes risk. It all equates to power in the hands of the suppliers. It is they who increasingly have the choice of which organisations they work with and for. Our role has to be managing that supplier experience so that we’re an attractive customer and able to help our companies and its suppliers to get the results both want and need. Procurement must move to running this extended enterprise. Teams must acutely understand what’s involved for those tier-one supplier companies, even more than they may comprehend it themselves. To successfully manage suppliers - and best serve their own organisations - procurement needs to know the supplier’s cost drivers; how best to motivate them; harness innovation; and understand risk. They must also align the supplier’s value with that of their own organisation - particularly where suppliers deliver key services directly to end customers. A resounding majority agree. A whopping 97% of your said suppliers should be considered part of your extended enterprise, however, less than half are doing so. And some are only targeting a few suppliers or doing it in a piecemeal way. While a larger number of organisations have now qualified as ‘leaders’ according to the survey’s criteria - 11% compared to 9% last year, standards have fallen. Fewer organisations in the leaders group have achieved ‘advanced’ status in the Six Pillars of SRM than have done so before.
procurement functions are based on running requests for proposals (RFPS) for their organisations. There is a sprinkling of category management, and those who are looking at supplier and supply chain risk, but predominantly procurement has allowed itself to become trademarked as the ‘strategic sourcing function’. But procurement could be and should be understood to be so much more. Otherwise, the existence of AI technology that is fast able to do much of this work through automation, may beg the question ‘why do we need procurement?’ If this isn’t addressed, procurement will cease to exist. And for the sake of the profession, a bit of panic wouldn’t go amiss. The good news is, there is an opportunity. And it’s not too late. Brand procurement needs to adapt. It needs to shift to becoming synonymous with managing the extended enterprise – its organisations’ suppliers. For a lot of businesses, more than 50% of their workforce isn’t directly employed by them, but by their suppliers. Much of manufacturing is done by a third party, which means The good news is, there is an opportunity. And it’s not too late.
Contents 03 Introduction
44 Value 50 Case Study:
04 What is the Extended Enterprise? 08 Academic Interview: Supplier Stress 14 S&P Risk and Reward 16 Enable: Using rebates to drive behaviour 19 Customer of Choice: The behaviour required to become a chosen client 24 Sales Perspective: SAMA Complex Relationships 26 About State of Flux 29 Six Pillars of SRM 30 Summary of Key Findings
Discover Financial Services
54 Engagement 60 Case Study: Transurban 64 Governance 70 Case Study: Nikhil Parva 74 People 80 Case Study - Deniz Kafali 82 Technology 88 Interview: Michelle Baker 92 Collaboration 98 Case Study: AirServices Australia 102 Case Study: Savills 107 State of Flux Call to Action
36 Extended Enterprise 42 Interview: Eric Wilheim
Alan Day Chairman & Founder State of Flux
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