28 Jun 16

Six pillars for successful SRM (Part 3)

Six pillars for successful SRM (Part 3)

Governance and process

We hope you’re enjoying this six part series on supplier relationship management (SRM) best practice. In part 3 we examine governance and processes which could be regarded as the SRM framework or ‘engine room’.  It should create a structure and rhythm of activities that drive SRM forward.

It begins with a best practice approach to supplier segmentation

The supplier segmentation process will determine your organisations most critical suppliers. It will be carried out in conjunction with business stakeholders in a logical and objective manner, using both risk and opportunity based criteria. In turn this will enable appropriate supplier management treatment strategies to be developed and an organisational and resourcing model to be optimised.

Within the treatment strategies defined for each segmentation grouping, there will be the appropriate governance model. The traditional approach to governance which only focuses on risk, compliance and oversight is expanded to create the channels and forums where individuals and groups can work collaboratively and strategically to create value.

Key roles and responsibilities must be agreed with business stakeholders

For this to work, the governance model will include a definition of key roles and responsibilities, such as the accountable executive and the supplier relationship manager, as well as other key players. It will define the key meetings and events required and the necessary reporting. As described in our earlier blog on stakeholder management, all of this needs to be agreed in conjunction with your key stakeholder groups and positioned with them in a way that aligns with their business objectives.

Underpin with the foundations of good SRM

What underpins SRM and needs to be part of good governance is an effective contract, risk and performance management process. If stakeholders are not confident that their basic contract, operational performance and risk management requirements are being met they will be unlikely to engage in conversations about collaboration and value creation.

Benefits and key activities of the governance and process framework

Good governance and process helps make the management of supplier interactions and relationships more consistent and predictable for both internal stakeholders and suppliers.

Key activities aligned to governance and process:

  • Develop a logical and objective segmentation process
  • Align effective and efficient treatment strategies to the segmentation model
  • Create governance structures that not only provide oversight but also enable growth
  •  Agree key roles and responsibilities with key business stakeholders
  • Design and implement a process framework and supporting toolkit
  • Implement effective contract, performance and risk management

Governance and processes support the other pillars by providing the structure with which the activities they contain can be developed and delivered. This pillar has a particularly strong link to the information and technology pillar where the effective use of technology can fully enable good governance.

It also relies heavily on having people in place with the right skills to carry out all of the above in a way that aligns with the objectives of the business. In the next blog we will examine people and skills in more detail.

If you would like to learn more about governance and process and how this model could be applied to your SRM programme please contact:

Mel Shutes (mel.shutes@stateofflux.co.uk) or the State of Flux team enquires@stateofflux.co.uk

Complete the 2016 SRM survey