26 Jul 16

Six pillars for successful SRM (Part 6)

Six pillars for successful SRM (Part 6)

Relationship development and culture

The commercial benefits of good SRM are clear: more innovation, better speed to market, greater profitability. The starting point for any organisation that wants to secure these benefits is a well designed business case, but that is not on its own, enough. Improving SRM is not about the actions of one person or department, but about the whole company. More than 90% of respondents say that good cultural alignment is important or very important to successful supplier relationships. 

This final blog of the six pillars series is relationship development and culture. This pillar differs from the others to a certain extent in that it combines the outputs from the other pillars including having a compelling SRM value proposition; good stakeholder and supplier engagement; governance and processes; skilled and capable people and good technology with some important proactive steps to develop more positive relationships.

SRM initiatives to deliver the value proposition

The 2014 SRM research report contained an analysis of the apparent gap between the business drivers that organisations were identifying as important reasons for implementing SRM, versus the actual benefits delivered. Supplier innovation which regularly features in the top three reasons to invest in SRM but has always ranked much lower both in terms of organisations having an effective process to manage it, and also the number reporting it as a tangible benefit. What this revealed was that not enough was being done to create the supplier specific initiatives that would drive value. As well as innovation we would be expecting to see other initiatives to drive the value that would typically be part of a company’s SRM value proposition. These might include value engineering and TCO initiatives, lead time and time to market reduction, product and service improvement and supply chain risk reduction amongst others.

Establishing trust and control

While it might be tempting to leap into a whole range of initiatives it is wise to pause and think about how to make these initiatives as successful as possible. Developing relationships requires more than just a series of initiatives or tasks. It requires trust and control to be established to enable collaborative working and sharing of information and ideas. This can be achieved through both changed behaviours and also more tangible steps such as a 360° relationship assessment and joint account planning.

Customer of choice

The relationship development and culture pillar also considers the concept of customer of choice.

We define a customer of choice as “an organisation that consistently positions itself through its practices and behaviours to benefit from supplier preferential treatment”. Our research confirmed from both the buy and sell side perspectives that customer of choice is real and that organisations with a developed SRM capability benefit more by being a customer of choice.

To become a customer of choice, suppliers value three things from a relationship: brand alignment and association, money (revenue and/or profit); and behaviours that signal they are a trusted partner. In our experience it’s the third area that makes the largest difference. Read our best practice tips on page 26 of the 2015 SRM report to evaluate if your organisation is demonstrating behaviours that enhance your customer of choice standing.

Key activities aligned to this pillar include:

  • A communication and information sharing strategy linked to segmentation
  • Develop an innovation strategy and supporting process
  • Conduct 360° relationship assessments with key suppliers
  • Create value release initiatives
  • Agree a joint account plan

This pillar has particularly strong links and a dependency on the people and skills pillar in that it requires strong collaborative and facilitation skills. To display customer of choice behaviours consistently across your organisation, SRM must be regarded as a business change programme and this links back to the first and second pillars: business drivers and value and senior stakeholder engagement. The wider business will follow the lead and behaviours demonstrated from the top.

This concludes our series of blogs bringing the six pillars of SRM to life. If you would like to find out if your organisation is a customer of choice to  strategic suppliers or 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

become a customer of choice

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