Over the years, it has become accepted that the organisations that have made the most progress in procurement (including the sub-set activity of SRM) are the ones that embrace the notion of it being a cross-functional endeavour, and not simply the responsibility of one department.
The mature application of category management practices has repeatedly demonstrated that its success is at least partly based on the involvement of stakeholders in sourcing decisions, from defining business requirements, through to contract award. And so it is with the ongoing post-contract management of those suppliers.
Encouragingly, in my thirty-plus years practicing in and around the procurement profession I have found a growing number of companies in many different sectors finally getting around to appointing dedicated resources to support their SRM practices. These are not just category managers with some SRM responsibilities (a typical starting point), but supplier relationship managers, held accountable for the oversight of specific key supplier relationships.
Despite this progress, I’m unconvinced that people currently placed in many of these roles are ultimately likely to be sufficient in number, nor indeed senior enough, to provide effective leadership to internal cross-functional teams. Success here isn’t simply about placing people in roles in order to run supplier meetings, it’s ultimately about how an organisation can optimise the value it can create (indeed co-create) and then secure from ‘strategic’ supplier relationships (a far from easy task). This leaves too many of the current cadre of SRM practitioners lacking the skills, authority, and credibility to bring this value home.
Getting colleagues on board (and keeping them there), and enthused sufficiently to collaborate internally, is key to ensuring SRM delivers what the organisation needs. In securing that necessary support and participation, CPOs really should be thinking of how SRM will deliver tangible benefits for their most important stakeholder groups, in effect being able to articulate with some precision what SRM will bring to marketeers, technical teams, IT, operations, HR, Finance, and others.
And, of course, there is also the challenge of securing the active support of senior management.
A recent case we discovered in the food produce supply chain demonstrated the importance of senior executive engagement with SRM. A key C-level executive who had a long-standing relationship with a major supplier refused to countenance a review of a sourcing decision taken three years earlier. Despite compelling evidence of the loss of Procurement control over the relationship and a failure of the supplier to provide tangible improvements in performance (quality and delivery, as well as cost), the opportunity to re-launch the relationship, resolve performance failures, and potentially create new value improvements was missed for some considerable time.
In another case, this time relating to adult social care, several competing internal projects meant important stakeholders were not encouraged by their senior management to participate in team-based SRM strategy development in respect of a key external provider. Procurement proceeded on its own, and ended up having to ‘sell’ its draft strategy to barely-interested stakeholders, losing momentum and continuing to allow mixed messages to leak from the organisation to the provider. Despite several rounds of messy internal communications and negotiations to secure some fledgling consensus on the future direction of the relationship, it was clear that the lack of participation of stakeholders meant that several value improvement ideas had to be put on ice while the organisation wasted valuable time in working on aligning its approach to the relationship.
So the key question for the CPO is whether stakeholder involvement has proven to be something better than intermittent (as in the cases above), that relationship analysis and strategy is genuinely being carried out in a cross-functional way, and that all those involved have the capacity and commitment to see value-improvement ideas through to fruition.
In his later years management guru Peter Drucker talked about the emergence of ‘connectivity’ as the defining characteristic of 21st century commerce. He argued for drawing data, knowledge and insight from multiple sources — things we now take for granted via our hand-held technology (and evidently not always from our colleagues). To quote:
“The capacity to connect may be inborn and part of the mystery we call genius. But to a large extent, the ability to connect and thus raise the yield of existing knowledge, whether for an individual, for a team or for an entire organisation, is learnable.”
He wasn’t discussing SRM, but you can see how his idea is applicable. How better it is to pool the knowledge and insight from around the organisation, to take account of the differing perspectives and requirements of various stakeholder groups. Joining the dots within our own organisations (and then across the interface with the supplier) is where we find the misalignment, misunderstanding, poor performance, duplication of effort and other forms of wasteful value leakage that present the opportunities for new sources of value that can benefit our own (and often the supplier’s) organisation.
I will end on perhaps a political note: leaders need to recognise that SRM efforts will be a lot more successful with stakeholder colleagues ‘inside the tent’ rather than sniping from the sidelines. And so the message is, make teamwork your watchword – don’t present SRM as a Procurement initiative, or you may find your efforts yield only modest, if any, sustained improvements in value.
This original article was published on the Spend Matters website, and can be found here.