Overview: SRM is a discipline of working collaboratively with those suppliers that are vital to the success of your organisation, to maximise the potential value of those relationships. Once the sourcing (procurement) team has engaged a supplier there is a real need to maintain a balance of control in the new relationship to ensure the benefits of that deal are delivered.

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  • Overview: SRM is a discipline of working collaboratively with those suppliers that are vital to the success of your organisation, to maximise the potential value of those relationships. Once the sourcing (procurement) team has engaged a supplier there is a real need to maintain a balance of control in the new relationship to ensure the benefits of that deal are delivered. Without proper control it has been suggested that the value of a contract can degrade by up to 30% in the first year This can lead to not only the failure to deliver the projected on-boarding benefit but create frustrating and unsatisfactory relationships which in turn can impact service, cost and the ability to adapt to changing market influences. There are of course other benefits to creating robust relationships with suppliers from a customers perspective especially if a stand alone SRM function exists. Cross category supplier measurement can take place, risk mitigation exercises (both reactive and proactive) can be undertaken and knowledge and innovation can be shared for mutual gain. Equally an SRM function can create a community for the SRMs (or Account Managers, Supply Chain Consultants, Supplier Performance Managers) in which they can centralise knowledge and deliver revenue generating opportunities for both parties through the exploration of additional, out of current contract business opportunities (i.e. the quid pro quo of a customer providing discounted goods and /or services to their ‘supplier’ in return for improved terms) With regards to the tangible or financial benefits associated with the application of robust SRM it is generally agreed that savings of between 3% and 5% (State Of Flux – Value Added SRM - 2009) of addressable spend are achievable through collaboration on cost reductions. There are a number of published concepts regarding effective SRM however it is generally accepted there are a number of key modules or building blocks. These are: » Supplier Segmentation » Accountability » Process and Governance » Technology » Value » Resourcing 1) Supplier Segmentation: In order to develop or improve SRM, an organisation needs to implement a supplier segmentation approach that considers the internal needs of the business, spend, and also accounts for all risk and business criticality factors. Segmentation traditionally uses 4 categories: - Commodity - Where little or no SRM activity is undertaken as the suppliers provide infrequent one off goods or services - Performance Management - Where focus is placed upon cost and service levels as the supplier is providing off the shelf goods or short to mid term services that are not strategically important and are provided from a competitive market environment - Development - Where focus is placed upon continuous improvement to service levels and cost as the arrangements are more mid to long term, with some strategic value - Partner - Where strategic long term goods and / or service suppliers are managed to secure supply and drive collaborative engagement with shared benefits An additional part of Segmentation relates to assessing the 'Power Dependency' of a relationship where approach, strategy, engagement and messaging tactics can be identified for certain types of supplier. 2) Accountability: Executive involvement is critical to the success of aligning the respective organisations strategic objectives and forms the basis of building a partnership and ultimately unlocking value for both organisations. The key challenge is who owns the supplier relationship, with 9 ownership types having been identified. Procurement functions should take the central role in coordinating supplier relationships, whilst owning and co-ordinating the process, governance and technology. 3) Process and Governance: Organisations have ‘pockets of excellence’ of clearly articulated processes and roles often led by the IT function. Organisations have often approach process and governance in a ‘one size fits all’ approach and are yet to tailor processes and roles and responsibilities to the different supplier segments. 4) Technology: Current SRM technology is limited although State of Flux has developed a Supplier Management System (SMS) which is used by a number of the worlds leading organisations. Traditionally there has been confusion about SRM solutions available with organisations implementing contract management systems or supplier performance management solutions as an alternative (which are still important but not SRM). Leading SRM organisations are using SRM technology as the ‘change agent’ to get stakeholders and wider business buy in. 5) Value: SRM needs to deliver both ‘hard and soft benefits’. That is cost savings as a ‘hard benefit’ and ‘soft benefits’ such as access to innovation and increased new product speed to market. 6) Resourcing: The three key skills required for procurement to implement successful SRM are: market & category knowledge, cross-functional working and commercial & contractual expertise. The current SRM role is viewed as a task to be performed in addition to the ‘day job’ and a lot of organisations have yet to implement a Supplier Account Management structure with dedicated resource and set roles and responsibilities.
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  • Overview: SRM is a discipline of working collaboratively with those suppliers that are vital to the success of your organisation, to maximise the potential value of those relationships. Once the sourcing (procurement) team has engaged a supplier there is a real need to maintain a balance of control in the new relationship to ensure the benefits of that deal are delivered.
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  • Supplier relationship management
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