“You know, implementing our SRM programme,” said a colleague at the recent CIPS Annual Dinner in London “has been incredibly hard. Just when we seem to be making progress, word comes down from on high that we must demand immediate savings from our strategic suppliers. It sets our relationships back months, if not years.”
In recent years, several surveys have indicated that supplier management is becoming established as a major element in the suite of disciplines Procurement brings to the business. It’s kind of obvious, isn’t it? Why wouldn’t a business wish to manage its key suppliers in a professional way? Nevertheless, even when SRM is adopted as a new practice, the challenge is not so much in doing it; it is in doing it well, and in a way that provides sustainable benefits.
In our experience what sets the SRM leaders apart is that they have managed to establish SRM as part of their business ethos; it’s in the culture….the way we do things around here. Secondly, they are adept at working with internal stakeholders, comfortable in letting supplier relationship leaders reside in whichever business function is best placed to influence the relationship, and the value the business can secure from it.
Getting started is not an insignificant hurdle. Many organisations remain largely blind to post-contract value improvement. For them, getting to grips with basic category management is challenging enough. These organisations’ ‘SRM’ efforts are characterised by reactive problem-solving and an easy reversion to the adversarial leveraging of suppliers.
For those that think more strategically, SRM doesn’t have to be over-complicated but it does demand careful relationship analysis and strategy development if the efforts are going to yield results. A patient and rigorous analysis of the power balance and strategic fit between customer and supplier ultimately makes for better decision-making, more appropriate ways of working and a realism of what can achieved.
Technology is not the answer. ‘Pioneering’ SRM does not demand CRM-equivalent ‘IT solutions’. A glance at the history of failed CRM system user adoption and low utilisation suggests that the widespread use of IT solutions for SRM is some years off. Of course, some technology can help (e.g. data-sharing), but it won’t make the crucial difference in delivering real value. It is better to develop a user-friendly process, tools and templates, underpinned by excellent governance, and then stick with it.
Unlike category management or contract negotiation, SRM is, relatively-speaking, a ‘slow burn’. Marrying rigorous SRM application with clear value goals and some early successes should lead to a steady pipeline of improvement initiatives demonstrating that the effort is worthwhile. But it will take time and a commitment to keep the vision alive. In the end, constancy of purpose is, perhaps, the most critical success factor of all.
By David Atkinson