Defined, Supplier Relations Management is the ongoing process of the systematic creation and capture of post contract value from supplier relationships.
Many executives are now beginning to understand the true importance of ongoing Supplier Relationship Management (SRM) within the perspective of a successful value chain. SRM is a key management and control component within Procurement contributions to the overall value chain.
Often the lack of internal SRM expertise and or management understanding of SRM exists, which hamper such type objective based programmes.
As a procurement leader facing the task of implementing a comprehensive SRM programme, these SRM principles are intended as guidelines to your thinking regards developing such a programme
- Recognise that Supplier Relationships is on -going and subject to continuous change, and understand that these relationships only really start after the initial supply contract has been signed. Remember, SRM programmes provide the base platform for any successful long term evaluation of supplier based performance, and that performance practically only begins after the contract has been signed.
- Therefore, the core of any supplier relationship ultimately is performance based.
- SRM is not only about supplier based relations, but is also directly linked to internal customer relations. These internal customer relations /internal performance are paramount to how Procurement is perceived within the overall parent organization.
- SRM and Supplier Value Management (SVM) Programmes, in order to be successful, must be fully integrated with both strategic sourcing, category management and most importantly, the overall strategic objectives of the parent organization.
- SRM/SVM Programmes are cornerstones to excellent integrated Procurement Governance, and will have a direct effect, positive or negative, on the quality of such governance, the value chain and how the responsible manager’s performance and reputation are perceived internally.
- Detailed analysis and benchmarking of all critical contributing general and specific factors need to occur in order for any supplier relationship programme to be successful in the long term.
- Supplier Relationship strategies are about careful total performance analysis, clear benchmarking and documentation. The subsequent aligning of the relationship management strategy for each particular supplier must be based on the strategic objectives and goals of both the procurement function and those of the enterprise as a whole, against the value of each supplier and their impact on your supply chain, and most importantly the overall business objectives of your organisation.
- Always remember that SRM is not about interpersonal relationship skills between buyer and vendor or getting the “best widget” deal possible, but rather, incorporates multi- faceted aspects into a focused, long term systematic plan for ongoing supplier management and value attainment, in order to support and achieve YOUR strategic departmental as well as the organizational goals, over the long term.
- Do not believe that the strategic goal of SRM is a win-win situation for both parties. Win Win is vital as both parties must be comfortable to ensure basic performance, but the true purpose of SRM is to achieve YOUR own internal goals and objectives, both departmentally and organizational.
- Remember the principle outcome of SRM is to enhance operational and strategic performance quality. All else will follow.
- When considering the introduction of SRM programmes, always remember the principle of ‘baby steps’’. Most successful SRM Programmes start with a small number of successful finely tuned SRM pilot programmes, before extending the strategy to the whole Supply Base. The benefit of this modus operandi is to not over stretch your project resources and expectations, as well as keeping confidence and enthusiasm amongst all stakeholders of the Programme.
- Always remember that SRM and SVM are not soft options, but rather are critical components of the incorporated ongoing vendor management programmes, in order to ensure ongoing value. As such each vendor needs to be regularly assessed for competence against the predetermined benchmarks. The prescription for this is on a 3 to 6 month cycle dependent on various contributing factors. The results of such assessment should be transparent, with the FULL input and participation of the vendor to early rectify any hiccups that may need to be addressed. The biggest failure with not using a transparency and willful participation policy is that such programmes can lead to resentment and opposition to SRM within supplier organizations.
Successful SRM programmes with can result in additional minimum value benefits of 2% of total spend and in certain instances up to 40+ %. Many Procurement executives believe SRM is nothing more than regular supplier meetings. DO NOT make that mistake, as SRM is a specialist, disciplined and complex component vital to successful Procurement governance and sustainable value assurance that needs continuous supervision evaluation, analysis and rectification and amendment, in order to realise its true value and potential.
Should you have requirement for professional input and guidance with regards to Supplier Relations Management or with any other aspect of Procurement Management please contact Karl on karl@furrutterandassociates.co.za or 27 82 393-3685.