Supplier management is often the poor relation of strategic sourcing and category management. But it is an integral part of best practice in procurement and essential if you are going to get the maximum value from your supplier relationships. Few companies take a structured approach to supplier management, but when a medium to long-term view of the value each relationship could deliver is taken, such an approach can deliver competitive advantage.
In today’s longer global supply chains, we are moving to fewer suppliers while buying more complex products and services. This means a supplier’s ability to work with your organisation and evolve in line with your own development is increasingly important. Building this into the procurement strategy is not simple and measuring it even more difficult. Many companies have attempted to do so by launching a supplier relationship management (SRM) programme, for which the results are mixed and too often are dominated by the implementation of new software.
At a series of recent roundtables I hosted for The Yorkshire Mafia
(don’t worry, it’s a business networking group) on this subject, there were some interesting themes that emerged. The first was the need to critically assess your current supplier relationships across the organisation to determine who your key suppliers are, both now and for the future. The second was the need to get wide internal stakeholder buy-in to ensure a balanced view of which suppliers are most important to you. This sometimes means procurement needs to bring together different internal functions. While your product development department may love the technology of a certain supplier, if the sales and marketing function does not believe that technology is core to your future product offerings, then before developing an approach with the supplier it is best to get internal alignment.
Delivering competitive advantage from supplier management is based upon taking a longer-term view, balancing short-term cost savings with longer-term value generation. With some suppliers you will want to become the customer of choice, and with others the investment required by best practice supplier management will not have a sufficient return. Typical benefits from a well-run supplier management and development programme include new innovations, improved service levels, successful promotions and product launches and longer-term permanent cost reduction. It is well worth taking a few hours to take a few steps back and consider how well your supplier management approach is linked to your company’s strategy, so it can deliver you competitive advantage.
☛ Tom Woodham is a director at consultancy Crimson & Co