“If you can’t describe what you are doing as a process, you don’t know what you’re doing.” (W. Edwards Deming)
When it comes to the consideration of supplier management, I find the quote above from Deming perfect, as it lays down a fundamental challenge to the CPO to think beyond high-concept (or me-too copying of another company’s programme), and get into the definition of what an SRM process needs to be for it to be successful for theirorganisation.
In Part One of this article paring I looked at SRM as ‘routine practice’. Activities such as deeply understanding relationships, developing strategies, and then determinedly, but pragmatically engaging suppliers in driving performance and value improvement. Easy words like ‘partnering’, ‘collaboration’, ‘innovation’ etc., with no method behind them, simply won’t cut the mustard with stakeholders. They’re too busy to be interested. So the more you can describe to stakeholders SRM as being a practical process that will deliver value to them, then there’s a better chance they will be convinced that you really do know what you’re doing.
Having discussed relationship analysis and supplier engagement in the aforementioned part one, what remains is the stretch goal of ‘value transformation’. Realistically, this should only be applied where a supplier’s performance standards are already high, a steady stream of incremental improvements is routinely generating value, and both organisations are ready and willing to shift the focus shifts significant product/service and process innovations. The aim is look at ways in which working practices between buyer and supplier organisations can be fundamentally transformed.
This is no longer about incremental ‘savings’, but a more radical way of thinking that could ultimately result in market-changing innovation, strategic alliances, outsourcing projects, and joint ventures. Relatively few supplier relationships will reach these dizzy heights, but CPOs and their teams should certainly remain open to transformative ideas from suppliers, and be on the look out for the real partners of the future.
If you’re a CPO wrestling with how to develop your SRM process and practice, then let me suggest a few things to consider:
- Decide what information would aid the deepest understanding of the supplier relationship, and select or develop analysis tools and standard templates to help you do that (Kraljic, Porter, Power, Perception Feedback, Supplier Corporate Strategy, etc.);
- Formally document the SRM process, ensuring that training materials include the tools and templates you expect your team to routinely use. What you should be looking for is a repeatable, well-understood process;
- Train and educate people in cross-functional groupings. The various analysis tools mentioned in ‘1’ might be used on a regular basis by Procurement’s category managers, but they’re rarely familiar to stakeholders. This is why training and ‘learning by doing’ in cross-functional teams is such an important ingredient to embedding good practice;
- Nominate SRM process ‘super-users’: people who you think can become supplier relationship management specialists and act as ‘internal consultants’, able to facilitate the process, and lead by example those cross-functional teams;
- Ensure the supplier relationship managers command the professional respect of internal stakeholders, enabling them to lead their often more senior colleagues in relationship strategy development. Ensure the organisation’s senior management team visibly endorses supplier relationship manager role;
- If there’s doubt about specialist SRMs being able to carry out the role, don’t give up. Be prepared to appoint more senior and/or experienced supplier relationship managers, on the basis that your success in managing key supplier relationships is too important to leave to enthusiastic specialists. In other words, give the SRM role ‘teeth’.
In a future article, I will be saying more about how the range of analysis tools can be used, and how the different perspectives of each can illuminate the value improvement possibilities from the relationship beyond standard procurement practice.
In the meantime, if you’re keen to understand more about SRM, then pop over to four pillars.co where you’ll find a whole series of articles on the subject, along with yours truly discussing on video how to make SRM work for your organisation.
Thanks for taking the time, and particular gratitude goes out to those who have ‘liked’ and ‘shared’ my previous postings on SRM. It is still, in my view, the area of procurement practice that has the biggest untapped potential to deliver best value over the longer term.