Embrace ‘entrepreneurial’ SRM to add value

3 November 2017

Procurement professionals should embrace ‘entrepreneurial’ supplier relationship management (SRM) to add more value to their organisations, according to the 2017 Global SRM Research Report from consultancy State of Flux. 

The ninth SRM report gathered data from more than 370 global organisations. It segments companies into ‘leaders’ (those with more mature SRM programmes), ‘followers’ (not as advanced but getting there) and ‘others’ (companies with limited SRM, which lack a clear strategy and consistent approach). Leaders make up 10% of respondents, followers 16% and others 74%.

According to the research, while 89% of leaders have a clear value proposition for SRM, linked to wider organisational strategic objectives, only 40% of ‘other’ businesses do. Almost half (46%) of ‘other’ businesses and 40% of followers do not know the financial benefits of SRM.

Speaking at the report launch event, State of Flux chairman Alan Day said: “People are still struggling to measure value, but where they are, there is defined benefit. Between 30% and 50% of deals don’t translate to the bottom line; that’s pretty scary thinking about how much time your teams are wasting.”

He added that procurement needed to think more entrepreneurially to realise additional value, embracing collaboration and innovation. 

“Value is changing,” he said. “It’s not just about savings. It’s risk, access to innovation, speed to market and so on. How do we help our businesses make business decisions, not just do deals?” 

The research found that cost reduction and avoidance was still the most important driver for developing SRM, with 21% of all companies choosing it as top priority. Risk management/reduction came second (20%), followed by competitive advantage (15%). 

State of Flux head of SRM Mel Shutes said the perspective of broader values of SRM, such as improving customer experience (10%) or bringing in innovation (8%), was increasingly being recognised.

“Entrepreneurial SRM will find the value the organisation hasn’t recognised,” he said. “It will enable the creativity and innovation of a huge supply chain and bring that capability into the organisation.”

But, he added, “value proposition remains absent in too many SRM strategies”. 

People development was also found to be a missing piece in effective SRM. Only 29% of companies have a defined SRM role and only 21% have developed a skills and competency framework for SRM. 

“There’s still a huge deficit between the need for SRM people development and what’s actually being developed,” said Shutes.

Other key findings from the research include that technology remains undeveloped, with 71% saying their SRM systems are disparate and not integrated, and that collaboration with suppliers noticeably improves as a result of SRM, with 66% saying this is the case.

Speaking at the event, Sainsbury’s head of procurement Hannah O’Reilly said investing in SRM was a “no brainer” as “no enterprise is an island” and the “sphere of influence of the supply chain has never been greater”.

She explained how by prioritising SRM with Fit Out UK, one of Sainsbury’s platinum suppliers, the company was able to accelerate a programme of store refits, creating considerable value.

“Create the conditions for your supply chain to want to take part in [collaboration],” O’Reilly advised. “Fit Out UK now come to us with problems we haven’t even thought of yet.”

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