13 Jan 16

Recruit a board-level SRM champion in 2016 - part 1

Recruit a board-level SRM champion in 2016 - part 1

Guest blog by Ryan Nied, Global Procurement & Supply Chain Executive

Over recent decades, there has been a substantial amount of research concluding that a high-performing Supplier Relationship Management (SRM) culture can create a competitive advantage for a company operating in virtually any industry.

Yet if you attend just about any procurement conference, you will likely hear from other delegates about their struggles to gain meaningful executive sponsorship for SRM as an enterprise-wide strategic imperative. Outside a few exceptional industry leaders, it seems many procurement organizations are on their own to determine how to build SRM as a capability set within their teams.

State of Flux, defines SRM as: 'A discipline of working collaboratively with suppliers who are vital to the success of the organization – to build trust and maximise the mutual value of those relationships.’ They recently shared the results of their 7th annual SRM survey, in which the respondents indicated that they see their executives as even less engaged with SRM this year versus the previous year.

Why are so many companies unable to move the needle with SRM?

One reason may be that many procurement leaders are ineffective in convincing the c-suite to buy into a comprehensive business plan with clearly articulated ROI. And even if a CPO gains the initial support of a board-level sponsor, maintaining the focus to fully execute plans over a period of years is exceptionally difficult as customer demands, industry trends and the organization itself continues to change.

However, for those that can build a strong case, and implement a sustained plan that changes the culture of the business, the benefits are tremendously valuable. Consider these points:

  1. The data is compelling – Highlighted within State of Flux's recent report is research by Dr. John Henke, which indicates that effective SRM can contribute 30-70% of company's gross profit. More data compiled by IACCM suggests that organizations erode 9.2% of its annual revenue from poor contract management, which is an important aspect within SRM.
  2. Multi-dimensional relationships on the rise - In many industries, we continue to see an increased convergence of suppliers, customers and competitors all interacting directly in the value chain. SRM capabilities are crucial to be able to build long-term value as the stakes increase with external business partners with whom we both trade and compete.
  3. Changing values of the workforce – Studies indicate that millennials value collaborative relationships and technology more so than earlier generations, both of which are paramount in SRM. Ignoring the trend will create a competitive disadvantage in the war for talent.
  4. The formation of the 'cloud' - Companies that choose not to invest in SRM technology are getting left in the dust by competition. Using dated methods to exchange information, drive supplier collaboration and manage contracts is an increasingly poor investment of resource. 

However for many it is tempting to initiate a grassroots SRM movement amongst stakeholders and suppliers. Part two of this blog explains why this approach is ineffective and provides 3 actions you can take to assist with gaining a board-level champion for SRM.

For further information on SRM please contact us on +44(0) 207 842 0600 or email us at enquiries@stateofflux.co.uk.

Ryan Nied is a senior procurement leader with 18 years of experience in global, industry-leading CPG and packaging businesses. For comments on this article, he may be reached at Ryan.Nied@gmail.com


Download the 2015 SRM report