How to develop SRM as a
discipline
For it to work well it has to be a part of the corporate DNA
A seminar on the development of SRM presented at the Premier ConfeX 2013
prepared by Adrian Bower, State of Flux Limited
© State of Flux Pty Ltd 2013
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The State of Flux
SRM Report
State of Flux has been performing Supplier Relationship research
globally for the last five years.
© State of Flux Pty Ltd 2013
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Agenda
What is SRM?
How to develop SRM as a discipline:
» Step 1: Understand current situation
» Step 2: Create a plan
» Step 3: Implementation – Key learnings
» Step 4: Sustainability – What makes it last
© State of Flux Pty Ltd 2013
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1. What is SRM?
2. Baseline the
current situation
3. Create a plan
4. Implementation
5. Sustainability
What is SRM?
© State of Flux Pty Ltd 2013
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1. What is SRM?
2. Baseline the
current situation
3. Create a plan
4. Implementation
5. Sustainability
Supplier relationship management in the wider context of procurement
lifecycle management
A discipline of working collaboratively with those suppliers that are vital to the success
of the organisation, to build trust and maximise the mutual value of those relationships.
Frameworks that measure and drive improved performance of contracts
through the lifecycle of engagement. These can include bonuses,
extensions scope expansion etc.
Ensures that contracts fit the deal to mitigate risks and provide
full value by improving the contracting approach which enables
quick identification of contractual rights, obligations and
liabilities.
Establishes systems that consider causes and
treatments to minimise the occurrence and
outcomes of events, along with treatments to
minimise the impact
Reviewing a component of spend,
identifying the best approach to testing
and re-contracting the market
ENHANCE
VALUE
ASSURE
VALUE
SECURE
VALUE
CAPTURE
VALUE
SRM
PERFORMANCE
MANAGEMENT
CONTRACT
MANAGEMENT
RISK MANAGEMENT
STRATEGIC
SOURCING
Pre-award
© State of Flux Pty Ltd 2013
NEW
VALUE
Post-award
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1. What is SRM?
2. Baseline the
current situation
3. Create a plan
4. Implementation
5. Sustainability
‘Six pillars’ of SRM: Six key elements of best practice implementation
© State of Flux Pty Ltd 2013
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1. What is SRM?
2. Baseline the
current situation
3. Create a plan
4. Implementation
5. Sustainability
Building on contract and performance management, SRM can deliver
direct and indirect benefits through collaborating with key suppliers
VALUE
CREATION
CUSTOMER
OF CHOICE
» Best resource
» Capacity prioritisation
» Preferred pricing
» Responsiveness
» Access to R&D
» Executive focus
» Account management
» Contract value retained
» Cost reduction/avoidance
» Revenue generation
» Speed to market
» Risk reduction
» Incremental value
» Competitive edge
STRATEGIC
ALIGNMENT
» Shared vision
» Joint goals and objectives
» Investment
» Improved planning
» Market knowledge
» Vested interest in success
» Win : Win
INNOVATION
& IMPROVEMENT
» Breakthrough innovation
» Guided innovation
» Shared intelligence
» Joint R&D
» Continuous improvement
» Shared road maps
» Value engineering
GOVERNANCE
& ACCOUNTABILITY
COLLABORATIVE
WORKING
» “One truth”
» Improved decision making
» Consistency
» Clear RACI
» Optimise time & resource
» Transparency
» Compliance
» Decision making
» Problem solving
» Development
» Shared risk and reward
» Open book
» Value chain improvement
» Risk management
VALUE RISK
© State of Flux Pty Ltd 2013
© State of Flux Ltd 2013
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1. What is SRM?
2. Baseline the
current situation
3. Create a plan
4. Implementation
5. Sustainability
Degrees of supplier management in the context of value
If applied correctly throughout the procurement lifecycle Strategic Sourcing and Contract Management will secure
and protect value. Performance Management will enhance value, whilst Supplier Relationship Management has
the potential to create new value.
SUPPLIER RELATIONSHIP
MANAGEMENT delivers value over and
Contract
Value to You
above scope of contract
Incremental value gains over life of contract
from PERFORMANCE MANAGEMENT
and continuous improvement
Optimal
Negotiated
Value
Robust CONTRACT MANAGEMENT
retaining full contract value
Contract never effectively implemented
and VALUE ERODED from day one
Value from
Business
Engagement
Over zealous negotiation and
continuous price squeeze is
unsustainable. Net VALUE LOST as
supplier is in an unsustainable position
to maintain service and works to reclaim
margin
Historic Value
Sourcing
Requirements
Definition Implementation
© State of Flux Pty Ltd 2013
Time
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1. What is SRM?
2. Baseline the
current situation
3. Create a plan
4. Implementation
5. Sustainability
SRM benefits reported through the 2012 global research
The charts reproduced here indicate the range of benefits and value being reported by leaders and followers responding
the to the 2012 survey.
Level of post contract financial value being delivered
directly by or enabled through SRM as reported by
leaders and followers.
(proportion of leaders reporting 8% + has doubled
since 2011)
© State of Flux Ltd 2013
Nature and range of benefits
being reported by leaders and
followers.
Year on year trend is for a wider
range of benefits to be reported.
© State of Flux Ltd 2013
© State of Flux Pty Ltd 2013
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How to develop SRM as a
discipline
Step 1: Baseline the current situation
© State of Flux Pty Ltd 2013
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1. What is SRM?
2. Baseline the
current situation
3. Create a plan
4. Implementation
5. Sustainability
Capability assessment must consider all key organisational components
across the major procurement functions
Procurement functions need to take
stock on the maturity of each element
of their business and understand
where SRM fits:
Organisational Component
• Supplier Relationship
Management: Incremental value or
incremental workload?
People
Supplier Relationship
Management
Process
Category
Management
Strategy
• Category Management: Proactive
integration of business strategy and
supplier capability or contract
authoriser?
Procurement Function
• Governance and Strategy:
Strategic Partner or Order
Processor?
Technology
Governance and
Strategy
• Buying Management: ‘Amazon
easy’ or bottleneck?
Buying Management
There is only so much change a
business can consume
© State of Flux Pty Ltd 2013
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2. Baseline the
current situation
1. What is SRM?
3. Create a plan
4. Implementation
5. Sustainability
A ‘Voice of the Customer’ programme allows you to understand how you
are perceived and provides intelligence about your customers priorities
Why do we engage in a ‘Voice of the Customer’ programme?
The concept of being a ‘provider
of choice’ is increasingly
recognised as a strategic
objective.
Few organisations really
understand what customers
genuinely think about them.
Not many companies know how
they are regarded in comparison
to their competitors.
What do we ask to achieve this?
Ask challenging questions.
Ask about scenarios. ‘What if?’
Ask what you can do to help.
© State of Flux Pty Ltd 2013
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1. What is SRM?
2. Baseline the
current situation
3. Create a plan
4. Implementation
5. Sustainability
The ‘Voice of the Supplier’ survey consists of questions which can be
tailored according to your industry, business context and category focus.
The standard State of Flux VoS survey consists of multiple choice and open-ended questions and is
structured into six sections as follows:
Section 1: Introduction
» Key demographic information
» Business unit/division interfaces
» Major competitors doing business with (optional)
Comparison of customer with four major competitors
Growth & innovation
4.00
Section 2: Growth & innovation
» Communication of business strategy, product/service roadmaps, etc
» Openness to ideas/innovations
» Process for evaluating ideas/innovations
» Barriers to successful implementation
» Functional responses to ideas/innovations
Section 3: Sustainability
» Communication of sustainability strategy
» Impact of this strategy on supplier
» Receptiveness to ideas to improve sustainability of products/services
» Collaboration on sustainability initiatives
3.80
3.60
3.40
General relationship
3.20
3.00
Tendering & negotiation
2.80
2.60
Section 4: Operational
» Planning and forecasting process
» Ordering and receiving process
» Interfaces at operational level
Competitor 1
2.40
Competitor 2
Customer
Section 5: Commercial
» Receptiveness to proposals (e.g., reducing total cost, risk sharing)
» Tendering and negotiation process
» Sharing of rewards
» Use of key performance indicators
» Payment process
Section 6: General relationship
» Degree of business alignment
» Experiences of dealing with customer (e.g., trust, decision making,
recognition)
» ‘Customer of choice’ status
» Comparison with major competitors (optional)
© State of Flux Pty Ltd 2013
Competitor 3
Competitor 4
Ordering process & forecasting
Payment
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1. What is SRM?
2. Baseline the
current situation
3. Create a plan
4. Implementation
5. Sustainability
Levels of maturity can be benchmarked through an SRM survey
Based on responses to key
questions embedded in their
SRM survey questionnaire
State of Flux have been able
to separate ‘leaders’ in the
development and deployment
of SRM from ‘followers’
and plot these two groups
on
an
SRM
maturity
model reproduced here.
OPTIMISED
ESTABLISHED
DEVELOPING
UNDEVELOPED
© State
of 2013
Flux
© State
of Flux Ltd
Pty Ltd 2013
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1. What is SRM?
2. Baseline the
current situation
3. Create a plan
4. Implementation
5. Sustainability
The anatomy of SRM – talent development
For learning and development investments to deliver sustainable change, they must be put into a wider
context of talent development.
Job design, attracting
talent and setting up
people to be successful...
Supporting, developing
and retaining top talent...
Ensuring pre-requisite
capabilities and operational
excellence is addressed...
Customer of choice is won or lost
through the interpersonal
skills that make the difference...
© State of Flux Pty Ltd 2013
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1. What is SRM?
2. Baseline the
current situation
3. Create a plan
4. Implementation
5. Sustainability
Nine key talent development factors assess and enable the value-add that
‘People and Skills’ bring to achieving SRM benefits
© State of Flux Pty Ltd 2013
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How to develop SRM as a
discipline
Step 2: Create a plan
© State of Flux Pty Ltd 2013
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1. What is SRM?
2. Baseline the
current situation
3. Create a plan
4. Implementation
5. Sustainability
To create a plan, consideration needs to be given to each of the six
elements of SRM
•
The 6 P’s – planning and preparation prevent……….
•
Considering all components will allow a holistic approach to the response and avoid areas
without focus disrupting the rest
•
Armed and ready for supplier, team and business questions
•
Develop your sales pitch: 20 – 2 – 20
•
Fully estimate resource, budget, time and effort……..it’s good to only ask once
© State of Flux Pty Ltd 2013
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1. What is SRM?
2. Baseline the
current situation
3. Create a plan
4. Implementation
5. Sustainability
Business Drivers and Value quantify the benefit of SRM in terms the
business will understand
•
Understand the needs of the business and their priorities
•
Capture the cost of supply disruptions, missed revenue opportunities, examples of value delivery
•
Build a business case that effectively estimates costs and benefits, providing a vehicle to
measure successful implementation
•
Be able to communicate value in their terms not yours
© State of Flux Pty Ltd 2013
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1. What is SRM?
2. Baseline the
current situation
3. Create a plan
4. Implementation
5. Sustainability
Stakeholder Engagement and Support demonstrates makes is a
enterprise initiative not just a procurement one
•
Identify who your Executive Sponsor/s is/are
•
Align the SRM programme to the solving of business challenges
•
Canvass stakeholder/customer opinion on priorities – ‘Voice of the Customer’
•
Understand your supplier priorities – Revenue growth, innovation, brand appetite
© State of Flux Pty Ltd 2013
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1. What is SRM?
2. Baseline the
current situation
3. Create a plan
4. Implementation
5. Sustainability
We explore Governance and Process to provide a robust and consistent
solution
•
Who is already doing SRM in what part of the business – critical high value areas?
•
What projects are also in train? How do you align them with your programme?
•
Who will own the process and governance? Who will run it?
•
Supplier segmentation and scalable framework. Industrialise it.
© State of Flux Pty Ltd 2013
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1. What is SRM?
2. Baseline the
current situation
3. Create a plan
4. Implementation
5. Sustainability
A deep dive in to People and Skills reveals where you have effective skills
that can be adopted and where there are development requirements
•
SRM is constantly recognised as an area that is under invested in when it comes to people
development
•
Traditionally procurement training is targeted at commercial negotiation not collaboration
•
Understand and identify the ability of the team and future requirements
•
Develop existing capability and amend the recruitment process to attract the right new talent
© State of Flux Pty Ltd 2013
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1. What is SRM?
2. Baseline the
current situation
3. Create a plan
4. Implementation
5. Sustainability
Knowing our Tools and Systems allows us to scale up to operate across
the enterprise and retain knowledge within the business
•
Identify existing platforms, if any, within the business and understand their capability
•
Review against external opportunities and build into your technology roadmap
•
Create tools that will support the effective execution of SRM related activates and make it easy
for the business to operate
•
Have a clear knowledge retention strategy – laptops and in peoples heads are not sustainable
© State of Flux Pty Ltd 2013
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1. What is SRM?
2. Baseline the
current situation
3. Create a plan
4. Implementation
5. Sustainability
Relationship Characteristics provide the platform for the whole program.
Encouraging collaboration and trust is proven to deliver benefit
•
From each of the other pillars understand where your business culture sits – win at all costs or
collaborators
•
Define a set of values or align them with those of the business. Gain executive support
•
Be prepared to police manage behaviour – ‘call out’ behaviour that doesn’t align with the values
•
Share the creation of incremental value
© State of Flux Pty Ltd 2013
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How to develop SRM as a
discipline
Step 3: Implementation – key learnings
© State of Flux Pty Ltd 2013
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2. Baseline the
current situation
1. What is SRM?
3. Create a plan
4. Implementation
5. Sustainability
Successful implementation is vital in achieving a successful SRM rollout
There is no ‘one size fits all’ approach to SRM implementation, and the right approach must be chosen
depending on your organisation’s priorities
Approach
Pros
Run a pilot
Big bang deployment
» Serious issues can be contained to one
business unit or area
» Concentrated efforts leads to faster
transition
» Quick wins
» Will have executive support
» Opportunity to refine the
implementation process
» Can create a sense of urgency
» Less time from implementation team
can be more cost effective
Cons
» Takes time, which increases risks such
as competing projects, project fatigue
and staff changes
» Learn as you go
» May require temporary interfaces and
bridges between systems, which can be
costly
» Stakeholder overload
» Large amount of change at once
» Risk of re-implementation
© State of Flux Pty Ltd 2013
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2. Baseline the
current situation
1. What is SRM?
3. Create a plan
4. Implementation
5. Sustainability
The journey to SRM
PEOPLE
PROCESS
TECHNOLOGY
1
2
Respond
to the need
for change
3
Recognise
that the current
‘As Is’ operating
environment is no
longer producing
the required results
4
Identify
5
Design
the desired
‘To Be’
outcomes
a Change
Management
Framework and
Implementation
strategy
6
Implement
a Change
Management
Framework
Support
the gradual
Internalisation
of Change
COMMUNICATION
with key stakeholders throughout the process
Identify the
business drivers and
related SRM value
Stakeholder
engagement and
support
© State of Flux Pty Ltd 2013
Create the ‘burning
platform’
• Is year on year
savings
a sustainable
strategy?
• Contract value
being
lost.
• Risk not being
managed.
• Value and
opportunities being
missed.
Define requirements
People
Process
Technology
Vision,
goals
and
objectives
Process
ownership
How to develop /
identify best
practice and use it?
Develop an
IT strategy to
support
PMO
Implementation
strategy
Implementation
support
Resourcing
and budget
Develop a
learning and
development
strategy
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1. What is SRM?
2. Baseline the
current situation
3. Create a plan
4. Implementation
5. Sustainability
Critical Success Factors
» Collaborative working
» Foundations
» Adopt a more balanced
approach
» The elevator pitch
» Develop more trust
» Areas of good practice
» Reward not reprimand
» Scalable framework
» Manage behaviour in the
business
© State of Flux Pty Ltd 2013
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1. What is SRM?
2. Baseline the
current situation
3. Create a plan
4. Implementation
5. Sustainability
Critical Success Factors
» Collaborative working
» Foundations
» Do you have an SRM
» The elevator pitch
» Areas of good practice
» Scalable framework
© State of Flux Pty Ltd 2013
framework in place?
» Do you have a senior SRM
sponsor?
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1. What is SRM?
2. Baseline the
current situation
3. Create a plan
4. Implementation
5. Sustainability
Critical Success Factors
» Collaborative working
» Foundations
» Have you defined SRM?
» Do you have an SRM
business case or
» The elevator pitch
communications pack
» Areas of good practice
ready to go?
» Scalable framework
» Does your stakeholder
community understand
the value of doing SRM?
© State of Flux Pty Ltd 2013
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1. What is SRM?
2. Baseline the
current situation
3. Create a plan
4. Implementation
5. Sustainability
Critical Success Factors
» Collaborative working
» Foundations
» Find the people who are
already doing SRM well in
» The elevator pitch
» Areas of good practice
» Scalable framework
your organisation
» Harness this good
practice and share it
across the organisation.
© State of Flux Pty Ltd 2013
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1. What is SRM?
2. Baseline the
current situation
3. Create a plan
4. Implementation
5. Sustainability
Critical Success Factors
» Collaborative working
» Foundations
» The elevator pitch
» One size does not fit all!
» Segment your suppliers
for improved
performance.
» Areas of good practice
» Scalable framework
© State of Flux Pty Ltd 2013
» Be clear about how you
work with your suppliers.
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How to develop SRM as a
discipline
Step 4: Sustainability – What makes it last?
© State of Flux Pty Ltd 2013
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1. What is SRM?
2. Baseline the
current situation
3. Create a plan
4. Implementation
5. Sustainability
How do you make it last longer than the head of SRM appointment?
»
Industrialise the processes, ensure their enterprise wide and make them
auditable
»
Ensure reporting links through to the boardroom to create an ongoing
business pull
»
Build it into job descriptions and performance objectives across the business
»
Add it into the induction process
»
Assess the benefit of delivery and report accordingly
»
Create external value in the creation and running of the programme
»
Retain the knowledge beyond the employees
»
Constantly evolve
© State of Flux Pty Ltd 2013
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ADRIAN BOWER
CEO - STATE OF FLUX ANZ
State of Flux Limited
50 York Street, Sydney.
NSW 2000
M: +61 (0) 449840942
E: [email protected]
www.stateof-flux.com
© State of Flux Pty Ltd 2013
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