31 May 18

Six steps to building industrial strength SRM part I

Six steps to building industrial strength SRM part I

No one needs to argue the case for customer relationship management anymore. Businesses have long held ambitions to record, analyse and manage every interaction with customers to maximise their opportunities. Even if they have not yet achieved the ultimate goal of a single view of each customer, they know where they want to go and the leadership team is happy to invest in technology, people and processes to get there. Yet for suppliers it is different. They may be vital in reducing costs, managing risk and generating new value, but suppliers tend not to get the same attention as customers. 

This year is our 10th year of global research. In that time, we’ve seen that although many have made some efforts to develop SRM, they struggle to embed or industrialise it in their organisation. In last year’s research, we found 74% of the 372 global companies taking part were still developing a sense of value for SRM The question is, how can you create a structured, durable approach to managing supplier relationships so that the value is obvious to everyone? There are six stages to building industrial strength supplier relationships, and unsurprisingly they correspond to our Six Pillars of SRM, which you can learn more about on elsewhere on our website and in the 2017 report

Let’s look at each in turn. 

1. Broaden your definition of SRM’s value

Success in SRM starts with defining the benefits you will deliver and communicating this effectively. You’ll also need to create measures to track these benefits. However few organisations can articulate what SRM means for them, we often see confusion between SRM and supplier performance management and even risk management. They are connected but distinct activities. We also observe many organisations don’t communicate value effectively nor have they developed the right sales pitch, one showing how SRM will help the organisation meet its strategic goals. 

The definition of SRM’s value is often too narrow. It is easily confused with the same definition of value as strategic sourcing, for example. But SRM will help you become a Customer of Choice for the right suppliers. That means you could get to harness the supplier’s innovation, reduce time to market and access the supplier’s A-team. It could also mean preferential pricing, access to scarce resources as well as risk mitigation.

2. Get stakeholder buy-in as high up as possible

There’s a direct correlation between having strong and active support from the C-Level leadership and getting value from SRM. But too often it’s pitched too low, at middle management, when trying to gain investment and support. 

We also see organisations forget that suppliers are also stakeholders. They are so focussed on internal stakeholders they fail to develop a communications plan for suppliers. Again, from our research and experience, we know that by listening to the Voice of the Supplier you’ll find out whether you’re a Customer of Choice and how to create more mutual value.

3.Understand your suppliers before defining the process

We often see organisations jump straight to developing an SRM process without properly segmenting suppliers and developing a treatment strategy for each group. We still see organisations segmenting with too few criteria. Spend and criticality are the most common; we recommend extending the criteria to include access to innovation, whether you’re a strategic customer, and whether the supplier is likely to collaborate with you. 

You must to define your segmentation approach before the SRM process. We also see too many apply one single governance model to all rather than developing bespoke governance models and role and responsibility definitions for all your most strategic suppliers. 

Most organisations still don’t define their KPIs well or link these to the supplier contract or supplier relationship. There should be a ‘clear line of sight’ between contract, performance and relationship. We also see confusion between KPIs with 360° assessment. The two are important but KPI’s are about hard performance data and 360° assessment is about the perception of the relationship. 

4. Train everyone working with the suppliers, not just procurement people

Many organisations only develop competency models and train those who are directly involved in SRM. That’s a mistake. They need to look at all the roles in the organisation that have direct contact and activities involving supplier relationships.

Currently, the level of investment from organisations in SRM training is low. We also see that training often focuses on the SRM processes rather than on the behavioural skill required to nurture collaboration, drive mutual value and foster innovation.

5. Use technology to kick-start your transformation

SRM technology investment is also low. We’re constantly amazed most organisations manage critical, strategic supplier relationships using Microsoft Excel spreadsheets, cutting and pasting data from other software. Excel is a great desktop application; it's not enterprise software. Using spreadsheets and similar tools can duplicate data, creating inconsistencies, inefficiencies and risks.  

We also see organisations implement technology too late. Organisations are still developing processes, implementing them and then looking to automate these processes later. They make stakeholders go through change twice. Instead, technology should reinforce process change and be introduced at the same time.

6. Create joint account plans with supplier to increase their value

To get to the stage where you collaborate with suppliers, and then create value together, you need a 360° assessment of your top or strategic relationships as well as joint account plans and value release plans. We often see organisations confuse a 360° relationship assessment with a Voice of the Supplier survey. The former focuses on a single relationship, getting views from both the buying organisation and supplier stakeholders on how the relationship is performing, typically on trust and control attributes. A Voice of the Supplier survey typically includes the top 100 to 200 suppliers and will help you understand if you’re a Customer of Choice for these suppliers and what you might do to become one.

Most organisations do not carry out joint account planning. Companies that sit down with key suppliers and align their account plans with strategic business priorities are the ones that get the most value from SRM.

Take part in our 2018 global Supplier Relationship Management (SRM) research. This year the theme is Sustainable SRM: how to make SRM Sustainable (or 'industrialised') in your organisation; and how SRM can drive sustainability in your suppliers and supply chain.

Take part now and receive your free benchmark!