6 Jun 18

Building industrial strength SRM part II - five pitfalls to avoid

Building industrial strength SRM part II - five pitfalls to avoid

Hindsight is a wonderful thing. You know what you’ve done wrong only when it’s too late. But at State of Flux we’ve seen and dealt with hundreds of supplier relationship management (SRM) initiatives. People come to us when projects are not going the way everyone hopes. Over the years, we’ve noticed the common pitfalls on the road to successful SRM.

Five pitfalls to avoid on the road to successful SRM: 

1. A bad business case that does not recognise the breadth of SRM benefits

Creating a business case remains a challenge for many organisations. They still try to create one by thinking that it might look a bit like the business case for strategic sourcing which may be based on savings. They fail to think like a key account manager and develop a business case based on the added value that could be achieved by having more collaborative relationships with strategic suppliers. For example access to innovation, speed to market, management of risk etc.

For many businesses the horizons of the business case are too small. They see it as a procurement-only initiative focussed on activities procurement will do. They should define the benefits in terms of an organisation-wide programme led by procurement.

2. Lack of leadership

To begin with, SRM programme leadership is crucial in order to ‘sell SRM’. It is necessary to drive the organisational change and challenge entrenched behaviours. Organisations commonly make the mistake of giving the role to someone who already has other responsibilities. As their time is divided, they are unable to maintain momentum to drive the organisational change necessary to see SRM succeed.

Another mistake we see is changing the SRM leader mid-way through the initiative. If you do that, you have to start building credibility all over again. Having the SRM programme led by someone too junior also leaves a lack of influence among senior executives and key stakeholders.

3. False starts lead to cynicism

‘We’ve tried this before and it doesn’t work here.’ That’s one thing you often hear from stakeholders. ‘It’s just another initiative and it will go away soon enough,’ is another. They are both symptoms of an SRM programme that has made a good start but failed to follow up on its promise and is left floundering on the sidelines.

We’ve found that starting an SRM programme after past failures is harder and requires a lot more stakeholder management and communications than an initial programme. It is much better to invest in the resources and right leadership to succeed the first time.

4. Unrealistic timetables

Most organisations drastically underestimate the time they need to implement SRM. Remember: this is an organisational change programme, not a procurement programme. Because of these unrealistic timelines, we see organisations skip the necessary steps.

5.  Failure to define innovation

Finally, organisations say they want innovation from suppliers, but often fail to set out and communicate what it means to them. It is a small wonder then that procurement and stakeholders alike complain that when they ask the supplier for innovation, all they get are generic sales pitches. If you want a supplier to go to the effort of developing innovative ideas for your organisation, show that you care by providing a detailed definition of what innovation is. A process to capture supplier innovation is also often lacking. Suppliers find it tough to navigate the buying organisation to find the right person to speak to about new ideas. Without someone to talk to, and an innovation feedback process, suppliers often pitch to the wrong person and never hear back. They will become disenchanted when they see their effort has been wasted. They won’t try again. Well, they might, but with your competition.

Benchmark your approach to SRM by taking part in the 2018 global SRM research. Upon completion you can request a free SRM Index Score which will benchmark your activities against best practise and competitors.

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