Do you know why you are doing Supplier Relationship Management?
The cynic in me says that some Procurement organisations do Supplier Relationship Management simply because ‘everyone else’ is doing it; it’s part of the procurement portfolio and you just aren’t doing the full job unless it’s there. SRM offers huge potential to any organisation that is dependent on other organisations for key products and services. Despite this, few seem to start from the point of asking themselves what the investment will give in return.
Many organisations will be able to build an argument that promises value through:
- Segmenting the approach to suppliers; and
- Building appropriate strategies to leverage the latent potential not yet tapped.
But, the investment required to get there is big and needs to be consistently applied over the long-term. This isn’t something that can be left to Procurement alone, everyone in the organisation needs to be not only involved, but also implicated in the outcomes. Indeed, as our own development resources show, you have to grow the skills, knowledge and experience of both Procurement and the organisation if you are going to be successful whilst standing on your own two feet.
Does this imperative demand a business to business response?
If the CEO doesn’t get it then put it away until a change of management or mindset and then try again. The CEO is the only one that can realistically sponsor such a pivotal initiative, if the intent is to deliver the full potential. If not everyone engages then the likelihood is that the programme will, at best, be viewed with scepticism by suppliers. At worst they will see the customer as schizophrenic as the offers made don’t match with the actions of the various customer stakeholders they come into contact with on a daily basis. This is why getting Procurement competent and then building good cooperation across the business is so important. Once these are in place you are ready to engage your supply base with managed, differential, relationship strategies. Tactical approaches to commercial suppliers may be business as usual, but the collaborative and partnership approaches will require high level involvement at a business to business level.
Is implementation being driven through both the operational and strategic business activities?
It has already been suggested that the organisation needs to present a single face (and approach) to its suppliers, at whatever level. If nothing ever changed then this could be set in stone and left to run. However, organisations operate in dynamic environments and this demands robust strategies that not only define the priorities and the approaches that will deliver them, but also provide a context within which daily decisions can be made that don’t compromise the long-term imperative. This has two distinct streams of activity associated with it. Firstly, the strategic approach that drives the focus of daily work. Secondly, the improvement of procurement activity at the functional, organisation, customer-supplier and network levels. There is always more to do than resources available and so difficult decisions have to be made about what comes first and what will be deferred until later. In the same way, beyond the functional and organisational levels of maturity, SRM becomes a key component of enabling the structured management of suppliers and the wider supply network.
Are you able to demonstrate a competitive difference through the programme?
The bottom line is much more than just that. Ultimately, your own customers (internal and external) need to see a difference they will engage with in a way that makes them recognise premium value in what your organisation is doing. This can only come through robust working practices driven by people who are well trained and motivated to deliver differential (measurable and unmeasurable) levels of performance. This doesn’t happen overnight or people would be asking why you haven’t already done it. And, it isn’t easy to deliver or maintain or everyone would be talking about their success stories. SRM is part of the enabling business solution; as the enterprise grows in size and maturity so does the need for understanding, segmenting and managing your suppliers.
This might not have read like the Supplier Relationship Management article you were expecting. However, if you reflect on the challenges and apply them to your own situation then it might just help identify where the holes are that you will fall, or be pushed, into.