People often ask me “What are the common mistakes leaders make in implementing their supplier relationship management (SRM) programmes?” They tell me their own SRM programmes are running out of steam, and they want to know why.
I would say that there are five key reasons why this is all too often the case.
The first ‘mistake’ leaders make, and it is completely understandable, is that SRM is positioned as a Procurement initiative, led by Procurement.
The problem is that SRM becomes associated with Procurement and is not recognised as an integrated business-wide competence. There is a strong case for supplier relationships being managed by non-procurement budget holders in other business functions, particularly where indirect services are concerned.
Procurement needs to reach out to other functional stakeholders and look to those stakeholders to take shared ownership in ensuring that the SRM programme continues to have legs.
The second issue is that there is, at a fundamental level, an over-valuing of the supplier ‘relationship’.
Some organisations are hooked on the notion of collaboration. Now, there is nothing wrong with collaboration and it is often to be encouraged; but not in all cases.
Collaboration is only one of a number of tools procurement professionals can use to create and capture supplier value, with leverage and risk management being two of the other most important ones.
So, let’s not get hooked on the relationship; let’s think about tangible value that comes from those key relationships.
We often find that in our engagement with stakeholders around the business that there is a misalignment in our priorities; Operations want products and services delivered on time, Marketing want great campaigns that deliver revenue growth, and Procurement are driven by Finance to deliver cost savings.
Failing to reconcile what are sometimes competing priorities is a real problem, and can result in stuttering progress.
Leaders need to recognise that they must focus in on doing whatever they can to reconcile those priorities. If they do so, the chances of alignment and progress will be so much higher. In other words, the SRM programme stays on track.
The lack of an SRM process, a framework with tools and templates, is another major cause of why SRM programmes run out of steam.
People think that maybe if they just met with suppliers a little bit more often, had a little more formality, and talked about cooperation and innovation, that somehow they’ll get there; value will fall from the trees like low hanging fruit.
At its heart, Supplier Relationship Management is a systematic process of managing value; and for that you need a framework and a toolkit.
Finally, we lose momentum on our SRM programmes because we have no visible support from the top.
Once we find that senior executives continue to meet with suppliers without consulting their SRM leaders within the business, we find that the process, even the whole programme, can begin to unravel.
So it’s really important that there is a senior executive involved in the supplier relationship, and that executive sponsors and leads by example i.e. working in complete alignment with the strategy developed by the SRM leader responsible for the supplier.
These are the five common mistakes that organisations typically make in implementing their SRM programmes, and I hope that in reflecting on your own programme, these are the mistakes you no longer are going to make.
See David Atkinson explain this on video below:
Five Reasons Why Your SRM Programme is Failing