3 opportunities every CPO should be across

Every CPO is sitting on an opportunity to either add or reduce profit through the company’s approach to supplier management. Of course each organisation will have a different focus or reason for implementing SRM. Often it’s driven by external factors such as regulatory compliance, it may be driven by growth and the need to access innovation or simply strategic sourcing savings need to be sustained year-on-year and new savings created.

Over years working with major organisations globally, alongside 7 years of research, we’ve found that investment in SRM boils down to the following three main reasons:

1)    Financial – access post contract savings/value, sustain sourcing savings and contribution to profit.

2)    Risk – identify, manage and mitigate supplier and supply chain risk.

3)    Innovation – access and capturing supplier innovation


The financial benefits of SRM are becoming well recognised and are backed not just by our research but also the research of Dr John Henke. John has spent 25 years studying how supplier relationships contribute to gross profit in the manufacturing industry. Below are some key findings and you can read more on the financial benefits of SRM in our 2015 SRM research report ‘The business of supplier relationships’.

Post contract savings - consistently we see leading SRM organisations are achieving between 4-6% post contract benefit.

Sustaining sourcing savings – more than 30% of strategic sourcing savings are lost through poor implementation -implementing SRM sustains these savings.

Contribution to profit - John Henke’s research has found good SRM contributes between 30-70% of a company’s gross profit.


Risk is a further opportunity for CPOs to add value. The Zurich supply chain resilience report showed nearly three quarters of organisations have had at least one supply chain disruption and 18% of organisations claim losses of €250,000 or more (for less than 1% of organisations the loss is >€500 million).

Frighteningly the Zurich research shows that 72% of organisations do not have full visibility of their supply chains and 50% of the disruptions come from tier 1 suppliers (which they should have visibility of). Our own research mirrors this, with only one in five organisations having robust risk management processes in place with strategic suppliers.

We think there are three ways of dealing with supplier or supply chain risk: manage it, insure against it or accept and live with it. Zurich’s research shows only 40% of organisations insure against supplier or supply chain disruption/risk, which leaves the majority either managing or choosing to live with the risk.

If you choose to manage your supply chain risk this way, given the volume of suppliers that your organisation will deal with, at the very least you should utilise technology to help with this.  Worryingly 80% of organisations currently do this on a spreadsheet!

Statess SRM technology focuses on the following areas:

Supplier riskiness or vulnerability –identifies the likelihood that the supplier itself is the disruption. This could be caused by a variety of challenges such as financial, geopolitical, ethical, CSR, environmental, reputational etc. All of which get tracked, monitored and flagged when an issue arises.

Relationship risks and issues – flags the operational and relationship risks between the supplier and your organisation which get registered shared and managed. If not dealt properly, these issues may cause failings in the relationship, distrust and ultimately disruption to the business.

Accreditation and compliance – measures and captures supplier compliance with the correct standards to ensure they are certified to provide the goods and services as well as operate in your organisations complex environment.

Suppliers risk processes – verifies whether the supplier is managing their suppliers' and supply chain risks in a robust manner.


The third area of untapped potential is supplier innovation. Only 10% of organisations have an effective process to capture, manage and communicate innovation. We’ve also seen that the large majority haven’t defined or communicated with their suppliers' what innovation is and means for their organisation. We can’t help but think this is a massive missed opportunity. 

Good communication is key, to help suppliers navigate your organisation. Statess can help track and communicate what is happening to the innovative ideas submitted.

It provides the platform for you to define and communicate what innovation means to your organisation, an area to post innovation challenges to suppliers and prospective suppliers (which enables crowd sourcing of innovative ideas) and an area to submit ‘open’ innovations (those proactive innovations, continuous improvements and ideas that suppliers bring to you). The system communicates back to suppliers what is happening to the innovation as it gets reviewed within the organisation.

SRM technology adds additional benefits in other areas of supplier management, such as: giving you a clear line of sight between the suppliers contract, performance and relationship management, providing structured supplier governance and finally it drives a consistent SRM standard globally.  

All of this provides a better supplier experience when dealing with your organisation. This creates a positive cycle … more momentum, more internal support and more financial value.

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For more information about SRM or SRM research, please go to www.stateofflux.co.uk or email enquiries@stateofflux.co.uk or +44 207 8420600. www.statess.com