Firms find SRM hard to grasp

16 July 2006
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17 July 2006 | Rebecca Ellinor

Companies across a variety of industries are reporting difficulty in managing their suppliers, according to a study by Archstone Consulting.

More than 90 per cent of the 50 US and global companies surveyed in consumer goods, services, retail and manufacturing industries have challenges with supplier relationship management (SRM).

Study co-author Ramin Tabibzadeh, said: "While many companies have conducted strategic sourcing and outsourcing to reduce costs, few have mastered SRM as a critical part of enhancing their supply chain and reducing overall costs."

Len Prokopets, a director with Archstone, said firms that lack SRM elements such as supplier governance, performance management and supplier development, are often unable to realise the full value of their supply base.

A total of 58 per cent of respondents reported an inability to hold suppliers accountable and ineffective use of incentives and penalties. Fewer than 10 per cent said current systems can effectively support SRM.

The research found that while most SRM initiatives are in their early stages, firms have achieved or expect to achieve significant benefits. These include a 7-11 per cent reduction in cost of delivery and a 10-14 per cent reduction in procurement headcount.

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