26 Jan 17

Companies can weather the perfect storm with SRM at the helm

Companies can weather the perfect storm with SRM at the helm

It’s 2.35am and the phone rings. You’re informed that an essential supplier has filed for bankruptcy. Suddenly everyone wants to know: “Which of our products depend on them? Which business units buy from them? How much is spent with them? What are the alternatives?” After 48 hours spent scrabbling for data – in accounting records, in ERP data, on spreadsheets and in emails – a bad situation gets worse. The receivers double the supplier’s prices in a desperate attempt to restore cash flow and pay off creditors. There is little chance of switching suppliers in the short term and the business is forced to absorb the costs. I’ve seen this happen and no one comes out of it well.

Not long after the dust settles, the question is asked: “How do we ensure it does not happen again?” The answer is supplier relationship management. SRM is a philosophy, a set of processes and an approach to information management that allows businesses to understand their supply base from a single information repository. It also helps you decide which suppliers to invest more time in and discover how to influence relationships with important suppliers to reduce risk and generate value. It is subject State of Flux has made its own.

There are many reasons for doing SRM and the scenario I’ve just described is among the most extreme. But, ultimately, it’s better to own the process than be owned by it and more businesses are seeking to manage risk with SRM. It also allows them to increase innovation and improve efficiency. Whatever the reason, there has never been a better time, because a confluence of technological, social and economic currents is pushing businesses into the perfect storm. SRM can guide them through it and towards success.

Businesses are increasingly aware that to grow they need to innovate and, as technologies and processes become more specialised, few can keep abreast of all relevant developments. This is why there is so much talk of the networked economy – businesses teaming up to offer a combined package of products and services to consumers, or other businesses. They need to collaborate with suppliers to remain competitive. But they can only do this with suppliers who see them as a customer of choice: no vendor wants to collaborate with customers who pay late, change orders and constantly quibble over costs. Simply beating up suppliers on price no longer offers value.

This shift also means performance in many senior roles – from CIO to CMO – relies heavily on how well relevant suppliers are managed. Big data means business can trawl many external sources for information about suppliers, as well as bring together internal data in a single dashboard. Linked to that, software tools that support SRM have become cheaper, more adaptable, easier to deploy and easier to connect with other applications – largely down to the advent of cloud computing and converging standards. And this is happening at a time when social media has made the public much more conscious about supply chain ethics.

All of these factors together mean the time is ripe for SRM. Read the 2016 SRM report to learn how your peers are rising to the challenge and discover where you can gain a competitive edge – before your competitors do.

Download the 2016 SRM report