VALUE SUMMARY OF INSIGHTS
2023 GLOBAL SRM RESEARCH REPORT
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believe improved risk management is one of their most important supplier management drivers for the next 12 months. 87%
of Leaders have a fully documented and implemented supplier management business case. 70%
of companies are achieving between 2% and 6% financial gains over and beyond contracted spend for key suppliers. 56%
Financial gains reported as % of contract value with in-scope suppliers (all respondents)
The business case should be further boosted by including the benefits that can be gained from a strategy to make suppliers more part of an extended enterprise. Consequently, creating a strong business case for expanding and improving supplier management capability should be easier than ever. However, this remains a challenge for many organisations. How developed are Supplier Management business cases? Leader Fast Follower Follower Value proposition/business case defined & fully documented, with accompanying communications plan created/ implemented 70% 37% 11% Value proposition/business case defined & fully documented 22% 31% 16% Value proposition/business case defined but not fully documented 7% 21% 27% Value proposition/business case has elements missing/is in progress 0% 7% 27% Value proposition/business case not yet defined 0% 2% 19% Less than 1 in 4 companies report having a fully defined and documented business case for supplier management. While for almost half, it remains a work in progress, and some elements are missing in terms of having been defined but not fully documented or acknowledged. More than 10% of companies have not yet defined their business case. As expected, Leaders are far more likely to have developed their business case, with 70% reporting it as fully defined and documented and the remainder making progress towards it. In 2022 the industry sector most likely to have a defined and documented business case was Financial
Services, and this has remained the same for 2023 with 35%, followed by Consumer Goods at 27%. Tracking value A perennial change to obtaining and maintaining investment in supplier management is an apparent inability to create tracking and reporting for financial and non-financial value that flows from activities. Given that many business cases for investment in supplier management capability feature value that goes beyond contractual obligations, ‘it’s surprising that so few companies are currently tracking this value. Like last year, less than half of respondents reported being able to capture and monitor the financial benefits delivered above and beyond contracted spend with critical & strategic suppliers. Less than one in four companies report having a fully defined and documented business case for supplier management. Where value is captured and reported, 2022 reflected a notable reduction in the direct financial benefits compared to 2020 and 2021, when the average proportion of companies reporting financial benefits between 2% and 6% was just under 33%. In 2022, that figure dropped by almost half to around 16%. We were keen to see if this was a temporary ‘blip’ due to the increased focus on managing supply chain disruption or a more permanent shift to a broader value proposition. We are pleased to ‘’report a ‘super’ bounce back as respondents reporting between 2% and 6% in direct financial benefit have exceeded 50% for the first time at over 56%. For Leaders, the performance is even stronger, with 30% reporting financial gain more than 6%, up from 20% last year.
19%
24%
29%
28%
What are the most important business drivers for implementing/ developing Supplier Management? (All respondents) 87% Risk management/reduction 72% Cost reduction/avoidance 70% Quality and service level improvement 70% More supplier innovation and continuous improvement 66% Supply chain resilience 60% Helping achieve your responsible business and sustainability goals 55% Improving your end- customer experience 49% Regulatory compliance 48% Improving your internal customer experience 45% Improving supply chain efficiency 39% Improving speed to market Business Case The number of reasons for investing more time and effort into supplier management has increased over the last few years. The COVID-19 pandemic put additional emphasis on supplier management, and this has been followed by supply chain challenges resulting from recent geopolitical events.
In line with a trend that has developed over a number of years, the need for improved risk management and supply chain resilience is clearly indicated as they remain amongst the most important business drivers for supplier management, having been indicated as such by 87% and 66%, respectively. However, the value proposition for supplier management remains balanced, with the next most important business drivers being regarded as cost reduction/avoidance and access to innovation being next on the list. While the events of the last few years have significantly raised the profile of supplier management, creating a business case remains a challenge, with less than 1 in 4 companies having fully defined and documented one. With or without a business case, companies are reporting value. Where it is being captured and reported, it has overcome a temporary fall in 2022 to be reported at record levels. The number of companies reporting financial gains
between 2% and 6% has exceeded 50% for the first time at over 56%. However, this should not hide that companies are still struggling to track and report the broader aspects of supplier management value. This is illustrated by the analysis of benefits attributed to supplier management compared to the same benefits reported in financial terms. It’s clear that there is more value to be reported, if only it can be reliably captured. Business Drivers For some years, reducing risk and managing risk more effectively has been the leading business driver for investing in supplier management. Prior to this, cost reduction was most frequently selected and was the basis for demonstrating a return on investment. Over time, and particularly due to the supply chain stress experienced during and immediately after the COVID-19 pandemic, risk established itself as the key driver. That is not to say that cost and innovation are no longer a priority, as they both still feature highly for most respondents. This year, we see that risk management /reduction is an important business driver for 87% of respondents, whereas cost reduction and innovation are reported by 71% and 70%, respectively. ‘It’s also interesting to note that the increased recognition of the importance of building supply chain resilience as opposed to just traditional risk management is maintained from last year.
up to 2% p.a 2% to 4% p.a 4% to 6% p.a More than 6% p.a
In the introduction to this pillar analysis, we talk about the value of considering suppliers as part of an extended enterprise that will better serve customer needs as part of a broader definition of supplier management value. In previous years, our analysis covered the types of indirect value being reported, but this year we have extended it to include whether that value is being tracked and assigned a financial value. The chart opposite shows the proportion of respondents reporting each of the typical supplier management benefits compared with the proportion that can express these back to the business in financial terms. In line with its position at the head of the list, business drivers risk management and reduction are reported as a benefit by 75% of respondents but quantified in financial terms by less than 10%. This is followed by cost reduction, where despite being a relatively easy metric to track and report, it is achieved by only 42% against the 67% that claim it as a benefit. Next, come service level improvement and collaborative problem solving where the reporting of financial gain is problematic.
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