Tuesday 12 August 2014

What the Heck is SRM? - Part 3

By Paras Sood

Now that I’ve had a chance to review some of the challenges in bringing supplier relationship management to the forefront of procurement exercises, I’ll try my best to consider some of it in practice using the benefit of hindsight J. For this, I’d like to focus on 2 elements that are pertinent in most of my discussions on SRM:

1)      The SRM life-cycle
2)      SRM collaboration

I’ll start with the SRM life-cycle. Generally, the common misjudgement that I’ve witnessed in SRM implementation, has been the lack of a clear life-cycle to help shape SRM success. Personally, I’m less concerned with what the life-cycle is, but more concerned that there needs to be one if you want to take SRM seriously in your organisation. For example, a simple SRM life-cycle could cover the following bases:

Phase 1: Supplier information – gathering, coordinating and enhancing information on your supply-base
Phase 2: Supplier qualification – reviewing, selecting and on-boarding suppliers for sourcing readiness
Phase 3: Supplier segmentation – classifying, leveraging and determining the focus of strategic SRM in your organisation
Phase 4: Supplier performance – analysing, evaluating and measuring the performance of your strategic suppliers
Phase 5: Supplier development – challenging, innovating and improving the business / service relationship
Phase 6: Supplier maintenance – revisiting, aligning and reassessing goods and services for business continuity ... And return back to Step 1...

Of course, a cycle could be adapted to whatever your organisation needs, similar to developing an organisation-specific category management / strategic sourcing process. Subsequently, the details should be fleshed out in terms of what needs to happen at each step and how will the life-cycle be managed and followed. But the emphasis here is ensuring that your procurement and supply organisation has a reference point for how they may consider the supplier throughout the end-to-end procurement process.

My second point, SRM collaboration, is a symptom of my eagerness to drive a collaborative approach in SRM measurement. As mentioned in my previous blog, this can mean working closely with internal stakeholders (strategic, operational, tactical) and external stakeholders (suppliers, customers and shareholders) to develop the right intentions of your SRM programme from the outset. Stakeholder management is, inherently, an existing challenge for procurement professionals, but is also a key skill in developing the correct SRM approach. However, once you’ve determined your SRM group, the real challenge is aligning them to shared goals. Again, there can never be a right or wrong answer here, as this is incredibly organisation / market specific.

Nonetheless, if I had to set up an SRM programme in the modern business world, I’d like to measure collaborative performance against the following goals, with associated questions as trigger points:

1)      Collaborative objective-setting – how well are you setting the success criteria of your SRM programme with internal or external stakeholders?
2)      Reciprocal feedback – are you open to 2-way feedback on performance? Is the supplier always at fault?
3)      Collaborative innovation (internally and externally) – how much emphasis do you put on developing innovative approaches across the value chain?
4)      Supply and service delivery – is the relationship delivering what it set out to deliver?
5)      Performance monitoring – are there adequate tracking and monitoring tools in place to measure performance appropriately, operationally and strategically, internally and externally?
6)      Supply chain risk mitigation – have risks been identified, assessed and factored into the SRM performance? How are they flagged at various points?
7)      Buyer and supplier incentivising – are both the buying organisation and supplying organisation motivated to make things work?
8)      Commercial flexibility – what techniques are in place to capture the unknown i.e. what falls outside of contractual agreements?
9)      Supply chain responsibility – are all organisations and stakeholders committed to responsible value and delivery?
10)   Reciprocal trade – are there any opportunities for the supplier to be a customer, building a real value-chain relationship?

Again, everyone and every organisation will have its own priorities; it’s worth spending time what these are before you get stuck into SRM development.

Finally, I’ve arrived at my final destination in this short series; I’m now saturated with SRM speak, but can pause for a brief sigh of relief before I have to consider my next blog topic.

I’d love to hear what other people think about this procurement challenge so that we can continue pushing the debate for SRM enablement. 

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