SRM leaders reap rewards

7 November 2011

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7 November 2011 | Rebecca Ellinor

Leaders in supplier relationship management (SRM) are reaping all sorts of benefits, according to consultancy State of Flux.

The firm’s third annual global survey, out today, quizzed 348 procurement, supply chain and SRM professionals at 274 organisations. It found that mature SRM programmes are getting tangible cost, risk, innovation and other benefits from collaborating more closely with key suppliers.

Over 80 per cent of ‘SRM leaders’ (those that place their SRM initiatives in the top half of State of Flux’s maturity scale, comprising just under a quarter of the survey sample) reported cost reduction benefits. The research found post-contract financial savings are typically in the region of 2-6 per cent of annual spend with a supplier, although a fifth say they have achieved 8 per cent or more.

Risk reduction is the second most common benefit, with 70 per cent of SRM leaders citing this, followed by cost avoidance (66 per cent), supply chain efficiency (64 per cent) and innovation (58 per cent). Among the ‘SRM followers’ (organisations that rate their SRM initiatives in the bottom half of the maturity scale), the comparable figures are 20-30 percentage points lower. Skills shortages – particularly communication and influencing skills – are the main internal barrier to progress in SRM.

Twice as many SRM leaders say they have received ‘customer of choice’ benefits, such as access to the supplier’s best people, priority allocation of scarce materials or production capacity and first refusal on innovations during the past year. Leaders see innovation as the biggest potential source of value from SRM activity in the next 12 months, whereas for the followers it’s cost reduction.

State of Flux managing director Alan Day, said: “Leaders are demonstrating that their investment pays off in terms of business benefits. In particular, they are seen as a customer of choice by key suppliers.”

Day said to position your company as a customer of choice you need to consider how you deal with suppliers. “Individual behaviours and organisational practices need to be fair, open and honest, so that they build trust and create an environment in which mutually beneficial collaboration can take place.”

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