Previously in this short series of SRM videos I have discussed the importance of having a clear reason for doing SRM – I called it the over-arching purpose; and then the question of who benefits – what stakeholders are likely to be interested in from SRM. In the third video I discussed the importance of delivering tangible results.
In this penultimate video, I’m going to cover ‘process’ and why it’s important to….
Know what you need to be good at
Here’s the transcript:
To deliver tangible value for money improvements (including cost savings) desired by the business, and to deliver outstanding customer service to internal stakeholders, then the CPO and colleagues involved in leading SRM must decide which processes and activities the SRM teams must excel at.
These include the heartland procurement processes of category management, negotiation planning, and contract management.
Although these technical procurement processes are not of much interest to stakeholders (at least typically), they are essential in ensuring the business selects the most appropriate suppliers, and securing the best commercial deals available. This will hopefully enable stakeholders to work with supply inputs that allow them to excel at their own business activities.
With SRM, it should be expected that CPOs also develop excellence in:
Supplier relationship strategy development – to be able to work with stakeholder colleagues in analysing each key supplier relationship and determining the most effective courses of action to deliver improvements in value for money.
Segmentation of the supply base – to ensure that SRM effort is focused on the most important relationships, likely to those where the value improvement potential is greatest.
Performance management – to ensure that what was contracted for, gets delivered.
Supplier development practices (including lean and process improvement) designed to identify and then secure additional benefits. There are going to be occasions where these efforts are going to uncover dramatic improvement opportunities.
I would also suggest that CPOs should put in place processes that provide support to internal stakeholders – ‘customer support’ if you like. This is about structured stakeholder engagement, demand management, working with specifiers to remove unnecessary cost at the design stage.
CPOs and their teams need to excel at these because their credibility with stakeholders depends on it, and because they are the explicit connection to the needs (and wants) of stakeholders, and the financial inputs required of procurement.
It is these links that ensure day-to-day procurement and SRM practices explicitly reflect the purpose of the programme, instead of what I’ve witnessed too many times in my work with companies: a grab bag of seemingly good, but disconnected, ideas.
In the final video of this short series on SRM, I’m going to suggest that SRM is not a procurement initiative and that stakeholders also need to develop some important skills to effectively manage key relationships on behalf of their organisation