Ask any well-seasoned procurement professional whether Sourcing or Supplier Management is more important and they’re likely to look puzzled and say “doh, both”. But why is it that when you find yourself sat in that boardroom, comfortable with your Chartered Institute of Purchasing & Supply, and perhaps your MBA credentials badged on your figurative lapel, you find yourself answering with goldfish impressions as your attempts to instigate more rigour in supplier management –are met with a dismissive “no, the budget holders see to that”.
For the fact is that the budget holders don’t – and neither should they necessarily. Let’s take a Facilities Manager – their job is to ensure the here and now, the day to day requirements are met through their external partners. In effect they are managing the operational performance to their agreed programme of activity. And then there’s the Security Manager, now s/he might well be using the same provider as per that wonderful strategic sourcing approach that was determined but s/he has got their own programme of activity that they are ensuring the supplier delivers to. And did I mention that the Facilities Manager only looks after the Head offices so there’s the other Facilities Manager that looks at the depots – oh, and there’s the catering manager, and the Environment Manager and the …….
Well someone needs to coordinate all of that to ensure that those wonderful months of agreeing a sourcing strategy for our FM example here, followed by implementing the strategy: drafting the Request for Proposal, the outline contract terms, perhaps the online auctioning, the beauty parade, the cross-functional evaluation until finally a decision was made for a Total FM solution with supplier – let’s call them – “EyeAllays SelfServ”.
So let’s flip over and put ourselves in our fictional FM provider ‘EyeAllays’ shoes. Having won the business following weeks and weeks of investment to the proposal, site visits, building up costs, working out what margin still makes the business attractive, and calculating and discussing the risks internally to death – I ask you, do you think they would now swash their hands together, smile and say “Excellent. Job done”. Naturally we all know there is no way – winning the business was a great win – but just that – a win. Now comes the hard work to ensure the business remains good profitable business. Structurally people will be put in place to deliver the service operationally, making sure it works and someone – or even a small team – will be put in place to oversee that it is working smoothly, will monitor the profitability for issues and will be constantly in dialogue with the client about what’s round the corner, what changes might be about to happen to try to stay 1 step ahead. It’s called Account Management. Eyeallays SelfServ is all over this account – for today, for the near term and above that they’re considering how to secure this great business for the longer term. In short, it matters.
Back to us corporate Buyers. We’ve appointed EyeAllays. And between the Category Lead from procurement, and the expert Managers (FM, Security etc.) we’ve all monitored the implementation closely – ensuring our TUPE obligations and other such have been conducted appropriately and no supply issues have emerged in the switchover. Then, satisfied the sourcing job is done, £’000 saved the Category Lead goes on to the next sourcing job and the various Facilities Managers carry on delivering with EyeAllays.
The fact is that the business & relationship will change and rightly so, that’s healthy. The process and negotiations completed at a point in time were built on the basis of information known at that time. We all know that. Operational leads will change (i.e. the FM Managers move on, get promoted) and tacit knowledge of the process and agreement is lost, new issues emerge for the operational lead which EyeAllays, always eager to please, offer to do a bit of this and a bit of that – and suddenly these new services are stretching beyond the scope of the agreed approach and pricing strategy. Or the new FM lead and their counterpart in EyeAllays change some demand pattern/KPIs/aspects of the commercials that may seem sensible to their specific perspective but could fundamentally alter the initial intent and strategic direction of the category as a whole and the relationship.
The bottom line is someone on the supplier side needs to be accountable for coordinating the supplier performance management, consistently across all these business ‘buckets’, needs to monitor and nurture the relationship at both an holistic and day to day operational level and ensure that the negotiation approaches and relationship styles employed by all who deal with the supplier are consistent with the strategic intent of the category strategy and relationship. In short: they need to do the same thing EyeAllays account manager is doing – they need to ensure the business relationship remains good business.
So next time you find yourself having to justify why you need investment in SRM (training, more people, relationship strategy creation, 3 rd party facilitation – whatever) just say to your CEO “Sourcing without SRM is like Selling without Account Management”. You may just have bought yourself 5 more crucial minutes to make your case.