SRM Video Series: #1 What Are You Doing It For?

In my thirty-one years (so far) of working in the procurement field, I’ve seen the profession grow in stature, and as my mentor Professor Andrew Cox has said, witnessed procurement become something of a science. When I started out ‘Purchasing’ was all about being able to negotiate deals with (mostly) subservient suppliers. What soon emerged was strategic sourcing, morphing into the category management process that is ubiquitous today.

Largely due to my experiences in the automotive and aerospace sectors, where supplier development proved to be highly effective in removing waste and extracting more value from suppliers, managing suppliers ‘post-contract’ for value became of particular interest to me. Nowadays of course, supplier development has been subsumed into what we now term Supplier Relationship Management or SRM. I have been fortunate to lead procurement teams in both of those sectors and have been able to implement SRM to an enviably high level, yielding truly game-changing improvements in value for my employers.

More recently, my leadership has been of consulting and training assignments in pharma, finance, logistics, transport, manufacturing, and the public sector, amongst many others. I often lament the abandonment of SRM by organisations following the financial crash, when urgent cost savings become the priority for just about everyone but, fortunately, SRM has made a comeback in the years since.

However, I find organisations are struggling to make SRM succeed; the definition of which should surely include widespread stakeholder acceptance of suppliers as a source of value and innovation, and cross-functional involvement in creating and implementing relationship strategies. Instead I find some practitioners selecting good SRM practices as if from a menu, and finding their programmes aren’t such a success. What appears to be missing is a genuinely integrated approach, based on clear cause and effect, along with a clarity of SRM vision.

I recently decided to record a number of short videos (five in total) that are designed to lead practitioners through a logical process, answering the fundamental questions that are at the heart of any successful SRM programme. The first video is ready to view here (a transcript of the video is provided below).

I will be posting the remaining videos and transcripts in due course, but if you would like to view them all, best view them on our YouTube channel.

I’d be delighted to hear peoples’ responses. Feel free to comment, challenge, or even start an argument!

Video Transcript:

“In the last year we’ve seen the re-emergence of Supplier Relationship Management (SRM) as a topical issue and a genuine priority for CPOs. Sadly, that topicality has mainly been case after case of evidently inadequate SRM from ‘bullying’ customers, particularly (but not exclusively) from the food and beverage sector.

Apparently extending supplier payment terms arbitrarily has returned as the weapon of choice of CFOs similarly bullying CPOs into demanding concessions from suppliers; behaviourabout as far as one can get from acknowledged best practice in relationship management.

At this point, it’s worth reminding people what SRM is really about. In my judgment, SRM is about value for money; how it is created, realized, and distributed fairly between participants in a supply chain. I say fairness, not because I’m about to get all soft and fluffy and talk about ‘partnerships’, but because SRM is a ‘long game’; results take time to achieve and, for the investment required by buyer and supplier, both need the confidence that the relationship is going to last, and that both ‘win’ enough to want to stay in the game. And I will go further: positive results from SRM don’t happen by accident. It requires ambition, determination, commitment and constancy of purpose to firstly, get an SRM programme established at all, which is no mean feat, and then to begin to realise those VFM benefits.

Those bullying tactics of some companies suggest they’ve, at least to some extent, lost sight of what it takes to optimise value from supplier relationships. The crude financial instrument of pushing payments to suppliers out an extra 60 days might please the CFO but, frankly, makes the CPOs look foolish and as far away from real boardroom influence as ever.

The question for those of us who are passionate about SRM, is how do we discourage such dysfunctional corporate behaviour, and avoid wasting the opportunity to shift the focus from tactical ‘savings’, to real cost reduction as part of an overall value-for-money-generating agenda? In short, how do establish an SRM programme that truly works? 

Although we’re able to use our SRM Healthcheck to help clients assess how they’re doing and then develop their next steps to making their programme a success, there are a number of steps that are absolutely crucial to any SRM programme.

The first question to ask yourself is…. 

1.    What are you doing it for?

Why has your organisation embarked on implementing SRM? I like to describe it as the ‘over-arching purpose’. 

Are you doing it because everyone else is? Has someone advised you that it is an essential part of any procurement transformation?

Has the boss told you to get it in place? Do you urgently need extra savings to hit cost reduction targets?

Is supplier performance to contract not good enough and you see SRM as a means of getting to grips with that?

Or is SRM a natural, incremental, development of your organisation’s category-management practice, but this time putting some horsepower into what happens after the supplier contracts have been signed?

I’ve seen all of these (and more) cited as reasons for deciding to implement SRM, and there are circumstances where any of them would be considered as valid. For example, sometimes implementing SRM really is a political, me-too exercise, done to demonstrate that we’re not falling behind others in our sector, although obviously, there are better reasons for doing it!

Regardless, what’s most important is for your SRM programme to have real purpose, a one meaningful to senior management, key stakeholders and peer groups, and those practitioners charged with leading the day-to-day effort.

My recommendation to CPOs is to articulate the purpose of SRM for your organisation in a way that makes sense to everyone, and that is a call to action. A compelling vision and strapline that makes it clear why you’re doing it will come in handy when support wavers and stakeholders complain that progress is not as smooth or as rapid as they expected.

In the next video I am going to talk about ‘who benefits’ from SRM. We don’t undertake SRM just for hell of it; it has to impact in a positive sense the experience of other people in our organisations….”

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