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Supplier relationship management – what's in a name?

Alan Day, Chairman and Founder of State of Flux
"What's in a name? That which we call a rose by any other name would smell as sweet." Juliet tells Romeo that a name is an artificial and meaningless convention. 
 
For supplier relationship management (SRM) there are many different names and definitions; but it doesn’t matter what you call it, the important thing is that you can articulate SRM in a way that resonates with your organisation and engages stakeholders.  
 
Over the last twelve months we have seen an increasing number of articles, speeches and client programmes describing the basics of SRM with many different labels: supplier management, supplier performance and innovation, vendor management, supplier account management, supplier collaboration, and so on. 
 
One example that springs to mind, where the definition of SRM seemed slightly questionable, was a presentation called ‘beyond SRM’. While the content was good, the talk focused on how they had conducted a ‘voice of the supplier’ programme, which we regard as one of the building blocks for SRM, and certainly not beyond SRM.
 
Another example is SAP calling their purchase-to-pay module an SRM module. And to add to the confusion we now have articles proclaiming that SRM is ‘dead’ and it’s now all about supplier optimisation.
 
So it’s no surprise that over the six years conducting annual SRM research, one of the challenges we repeatedly see for organisations globally is confusion over what SRM is or means. Some stakeholders perceive it as tighter performance management of the supplier, whereas others respond by asking ‘when’s the next round of golf?’. 
 
The name will vary across different industries or organisations – either because it fits your definition, or to avoid some historical or internal confusion. The key is to make sure the name of the initiative or change programme aligns with the organisation. And importantly, get the definition right for your organisation and ensure you communicate that definition.
  

We have our own definition of SRM

To avoid confusion, for the rest of this article we are going to use SRM as the name, but please substitute your own label if your organisation calls it something different. At State of Flux we define SRM as:
 
‘A discipline of working collaboratively with suppliers who are vital to the success of the organisation – to build trust and maximise the mutual value of those relationships.’
 
We see SRM as part of a hierarchy that has risk management as the foundation, then contract management, performance management and finally supplier relationship management, as illustrated in the diagram below. 
 
 

Why is an SRM sales pitch important?

When we started our global SRM research over six years ago, one of the first things we noticed was organisations were unable to articulate what SRM is in terms that other stakeholders in the business could understand. We loosely called it the SRM ‘sales pitch’. When we asked the question, ‘does your organisation have an SRM sales pitch?’ six years ago, unfortunately not a single organisation actually had one.
 
To effectively communicate what SRM is – to get buy-in and support – it’s important to recognise it isn’t a procurement change programme (although typically led by procurement), but is in fact a business change programme where all stakeholders (executives, operational and suppliers) are aligned behaviourally. It is no good talking collaboration with a supplier and then having one of the stakeholder groups displaying the opposite behaviours. 
 
Throughout the duration of our SRM research, we have seen a direct correlation between having stakeholder leadership on this issue, especially from the executive level, and overall SRM maturity. This is because executive stakeholders are able to support at two levels. Firstly at a programme level, through their sponsorship, by active involvement and where possible, freeing up budget and resource for material support. Secondly at an individual level with a strategic supplier, where they may sponsor the relationship, drive initiatives and innovations, and align resource, focus and behaviours.
 
Because of the critical success factor of having stakeholders engaged and supportive, it is key to ‘sell’ what SRM is with a value proposition. This should address how SRM aligns to the business strategy, what value it brings to each stakeholder you are talking to (e.g. executive, operational or supplier) and what’s involved in actually doing it. This is especially important given the definition of SRM means different things to different people.   
 
For a good SRM sales pitch – one that will resonate with each interested party – you need to do your homework. Think of answering the following questions:
 
  • What does the stakeholder or stakeholder group (e.g. operational groups such as finance, HR and IT, geographical group or business group) want to achieve? 
  • How will SRM support them to achieve this goal?
  • How will SRM support any personal goals they may have?
  • What input do you need from them?
  • What constraints or challenges will they face?
  • How does this align with the wider business strategy and support their part in that?  
Remember, it’s not about you or procurement. It’s about that stakeholder, and adding value to them and their team. So use their language, and display your understanding of their area / business unit / team. It requires preparation. Like any sales pitch, you only get one chance to make a good first impression about SRM, so plan your pitch to flow like a conversation with a logical flow. For example:
 
  • Start with a clear business goal or objective to frame the pitch.
  • Transition to a key issue that is relevant to the person you are talking to and aligned to what SRM is about. You may need to have several key issues you can anchor SRM to, so you can tailor your conversations to the stakeholder.
  • Next, move into talking about how SRM addresses the issue.
  • Follow up with how this delivers quantified value. Use hard evidence (perhaps from the case studies in our research) to back this up.
Getting the name right is important as usually the first sentence of a sales pitch is either an attention-grabbing statement or a positive statement introducing the best information about SRM. A method is usually selected depending on available attention span of the stakeholder.
 
We use a technique called 20:2:20 to help construct SRM sales pitches. You create different SRM pitches depending on whether you have 20 minutes, 2 minutes or 20 seconds to ‘sell’ the concept. Take some time out to practice and test it in a safe environment before getting in front of your stakeholders. The same approach can be adopted for suppliers by ensuring the SRM value proposition identifies what is in it for them. 
 
Our initial SRM research identified themes and activities that were common to more successful approaches to SRM. Progressively, we developed these into the ‘six pillars of SRM’ model below that defines the key elements of SRM and the range of practices that support these elements:
Creating an SRM pitch is a key activity in the stakeholder engagement and support pillar. A step change in stakeholder engagement can be achieved by investing time in developing the SRM value proposition for your business, and aligning it to your key business drivers and therefore what your stakeholder will recognise as important. Turn this into an effective SRM sales pitch recognising the key drivers for your audience and the limited time that might be available to get your message across.
 
Contact Alan Day on +44 (0)2078 420 600 or email him at alan.day@stateofflux.co.uk for further information on the SRM sales pitch. And take part in our 2015 global SRM research.
 
 

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2020 Global SRM Research Report - Supplier Management at Speed.

Now in its 12th year, this year we have seen an increase of 29% in the number of companies responding compared to 2019. In addition, the proportion of respondents at CPO/EVP level or equivalent has increased to over 50%. Learn how now, more than ever before, procurement has the opportunity to make the case for SRM to ensure organisations don’t just survive but thrive.

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