GOVERNANCE SUMMARY OF INSIGHTS
2023 GLOBAL SRM RESEARCH REPORT
66
67
developed and implemented treatment strategies. When looking at incorporating behaviours into treatment strategies, Leaders have embraced this concept most enthusiastically, with over 50% having defined and documented behaviours and provided training. Governance models continue to be undervalued and often overlooked. Only 57% of respondents have an effective governance model in place for more than half of their critical and strategic suppliers. In addition, the majority of RASCI models created as part of governance fail to include supplier stakeholders. Implementing effective contract, performance and risk management continues to be a challenge. When looking at the methods being employed, it’s clear that many companies still rely on tools such as MS Excel to capture and report KPIs. While there is an increased focus on risk management, this is still too often done via ad hoc meetings. Segmentation The vast majority of organisations are now segmenting their suppliers (more than 95% according to our latest figures). However, many companies (around 40%) are still using a relatively simplistic approach based only on assessing product/service criticality and spending (in most cases historical). While achieving a segmentation output, this won’t deliver the real purpose of the segmentation exercise. Clearly, the experiences of the last few years are leading more companies to consider the broader supply chain risks associated with categories and suppliers, with this being a criterion used by almost 60%. Over recent years, we are seeing a trend to introduce criterion that cover growth and opportunity, rather than just focus on risk. These emerging criteria include: > Supplier innovation capability used by 31% > Potential for growth and value used by 40% Leaders are far more likely to adopt these ‘growth’ segmentation criteria,
where they are more than twice as likely as Followers, to be using ‘potential for growth and value’ and ‘supplier innovation potential’ as segmentation measures. Which criteria are used to segment your suppliers? (All respondents) 89% Business criticality of products / services 81% Level of spend 59% Supply chain risk 41% Market characteristics - number of suppliers / competitiveness 40% Potential for growth and value creation 31% Suppliers innovation capability 30% Regulatory requirements 29% Reputational risk 28% Supplier appetite and capability to work collaboratively 26% Your importance as a customer 25% Supplier unique technological capability 5% We haven't segmented our suppliers Treatment strategies Segmentation is only the first step in determining how suppliers should be managed. Having considered the relevant criteria and gone to the trouble of designing and executing a process, the output must be put to good use in devising the most appropriate plan for each group of suppliers. This will include the best approach to the management and oversight of fundamentals such as performance, contract and risk management, as well as the strategic alignment, joint planning and value creation for suppliers deemed the most critical. Differentiated strategies for supplier groups also enable the most
Behaviours When discussing treatment
How developed are the behaviours that you have defined in your supplier treatment strategies? Leader Fast Follower Follower Behaviours being documented, communicated, trained, measured and continuous improvement activities in place 54% 19% 3% Behaviours being documented, communicated and trained 13% 15% 7% Behaviours being documented and communicated 7% 31% 24% Behaviours being documented 7% 12% 17% No behaviours included 4% 23% 48% Governance models An appropriate governance model is essential to a supplier management treatment strategy. It provides the necessary oversight and the format and cadence of reporting and meetings that will keep the relationship on track. The term‘ Governance model’ is often used to describe a range of management activities that need to be put in place to varying intensity levels depending on the segmentation output. Typically, it will include key roles and responsibilities, years, establishing the necessary governance model is not prioritised by enough companies. Overall, the feedback indicates that only 57% have what would be described as an effective governance model in place for more than half of their critical and strategic suppliers. meetings with agreed terms of reference, and reporting requirements. As in previous
efficient and effective deployment of resources. Given that the completion of supplier segmentation has been at the 90%+ mark for a number of years, it’s clear from our most recent research that this is not translating into treatment strategies at the same rate. Understandably the focus has been on treatment strategies for critical and strategic suppliers, but even here, only 47% of companies report having fully developed and implemented treatment strategies. Predictably the figure for Leaders is much higher at 93%. When we look at suppliers in the second and third groups, usually created from segmentation, we can see the numbers are a lot lower with 20% of companies having no defined treatment strategies in place for ‘approved suppliers’.
Key statistics
strategies, we have a tendency to think about the ’control’ side of the relationship, for instance, what reporting needs to take place or what meetings need to happen. While this is important, we know that working with suppliers and developing productive relationships is not just about control but also about behaviours. In 2020 we began asking companies if the treatment strategies they created make any reference to the behaviours that need to be adopted. It was encouraging that almost three out of four organisations reported including the requisite behaviours in their treatment strategies, and for Leaders, this figure is closer to nine out of 10. This year we have asked how those behaviours are being developed, including documenting them and providing training.
of Leaders have fully documented and implemented treatment strategies. 93% of companies are making use of third-party supplier due diligence services. 22% of Leaders have a fully documented RASCI in place that includes supplier stakeholders. 57%
“To bring suppliers into an extended enterprise, it will be necessary to develop more integrated governance models with two-way reporting.”
Segmenting suppliers as the basis for determining the best supplier management approach is now well established, with more than 95% of respondents reporting they do this. However, the criteria used continues to be limited. Less than 60% of respondents regularly use criteria other than business criticality and spend, although supply chain risk features more. While segmentation may be embedded, this still does not consistently result in treatment strategies, even for critical and strategic suppliers, where only 47% of companies report fully
Maturity of treatment strategies by segmented internal and supplier stakeholders (All respondents) Fully Developed Partly Developed None Key & Strategic 49% 42% 9% Approved Suppliers 33% 47% 20% Transactional 25% 35% 41%
Here we’ve used a comparison between Leaders, Fast Followers and Followers to illustrate how this aspect of relationship management is maturing. The following chart shows that its Leaders that have embraced this concept most enthusiastically, with over 50% having defined and documented behaviours and provided training. This is in sharp contrast to Fast Followers at less than 20%.
Powered by FlippingBook