In my work training or consulting with clients, and lecturing to MBA students in procurement and supplier relationship management (SRM), a number of general principles (axioms, if you like) have emerged that people find useful when it comes to understanding, promoting and implementing SRM in their organisations.
If your organisation has an SRM programme in place, or is thinking of launching one, then this might be a good place for you to refresh or even begin to develop your thinking.
Here are some of those principles, starting with a simple definition:-
- SRM is the systematic creation and capture of post-contract value from key business relationships;
- It is about aligning the whole enterprise around the task of managing a specific supplier based on a clearly documented relationship strategy;
- It is mostly about collaboration with strategic suppliers, but can still be adversarial;
- SRM needs to be completely integrated with strategic sourcing / category management processes. It ‘s not something you design after the contract is signed;
- It requires a detailed analysis of the specific supplier relationship, before the strategy can be determined; one size certainly does not fit all;
- SRM is not a soft option in dealing with suppliers. It’s demanding and process-focused. It’s a lot more about how we plan than it is about an ‘interpersonal’ skill set;
- It requires recognition that ‘relationships’ are not an end in themselves. Successful relationships are an outcome and, for the buyer, that outcome can be measured in value terms;
- SRM is not all about ‘win-win’; although contracts must be structured to ensure each party enthusiastically implements the agreement;
- It is as much about driving-up day-to-day operational performance as innovation and joint value creation;
- To get started, it always best to successfully implement a small number of SRM pilot projects, rather than go for the ‘big bang’. If you choose the latter you’ll quickly find your resources spread too thinly.
More and more organisations are looking to design and implement SRM and many mistakenly believe that regularly meeting with suppliers is the key to success. As you can see from what’s above, it‘s a lot more than that: but that success is worth shooting for. Organisations that deploy SRM successfully report additional value benefits of 2% of total spend, right through to 40%+ from specific key relationships.
If you are a procurement leader who would like to know more, or a lot more; then contact me and we can discuss how we can help either get started, or re-energise your SRM programme.
On the other hand, if you’re in sales, then rest assured, we can help you navigate this challenging terrain, and allow you to build better relationships, provide value and improve revenues and profit, and bring more professionalism to your sales team.
By David Atkinson