Supplier Relationship Management and Radio WII FM

When you want to get support for whatever it is you’re doing, Brian Tracy advocates tuning into everyone’s favourite radio station … WII FM  or “what’s in it for me”. 

So, if you want Supplier Relationship Management to be anymore than clever words or a new fad, you need to tune into WII FM for the senior people in your organisation as well as those of your major suppliers. 

A selection of benefits from SRM can include the following, depending on the industry you are in. 

Service related benefits

·         Early supplier involvement helps to shape the question that their product or service aims to answer for you and so gives a more effective solution

·         Captures and shares Intellectual Property

·         Provides a better balance between technical and purchasing requirements

·         Reduces the supplier learning curve

·         Acts as a free source for “hot housing” and incubating new ideas and problem solving 

Commercial related benefits

·         Lower cost of bidding and engagement

·         Marginal costs from account planning

·         Lower costs from target costing and benchmarking

·         Reduced costs from supply chain management i.e. suppliers’ suppliers

·         Better  ”lock in” of suppliers if demand outstrips supply

·         Shared risk 

People related benefits

·         Continuity of work allows suppliers to have a career path for their people (if you are buying a professional service such as consulting) and ”refreshes” ideas and lowers costs

·         Enhanced skills from problem-solving with suppliers

·         Improved communications and collaboration (if your organisation has multiple sites) 

Process related benefits

·         Reduced non-value adding tasks

·         Capture and use knowledge and learning for use in future work

·         Faster response to your needs from improved processes

·         A more consistent pool of people (if a service related purchase) who will build a knowledge bank of your organisation 

What do you think?  Do any of these benefits actually mean anything to anyone at senior levels.  If not, what do you suggest as the benefits with which to sell SRM?

This crazy little thing called SRM

One thing you will need to agree with your suppliers as well as your internal Sponsors is … exactly what is SRM?

Supplier Relationship Management means different things to different people.

For example, type the phrase into a search engine such as Google and you will get more than two million hits, many of which relate to software applications for recording and analysing supplier data.

Others think of SRM as a means of monitoring, measuring and reporting supplier performance.

What you should do in your supplier relationship management programme is to use a process with which you can systematically find and deliver opportunities for delivering cost and service benefits (both immediate and longer term) and for initiating innovation and continuous improvement.

Until you deliver on this short term focus it’s unlikely you will get support for the more attractive (and ultimately more effective) longer term SRM outcomes like joint business planning.

So, if SRM is important to you, you have to ask the next question which is whether (as an organisation) you are ready for SRM. There are a number of factors that you need to consider. These include:-

·        The availability of senior members of staff who are willing to be sponsors of your key supplier relationships.  The issue here is that sponsors are needed not only to drive the pace of the SRM programme and ensure a quality output but may be needed to unblock organisational and policy barriers to you achieving your SRM objectives.

·        The perception and reality of the value that your SRM suppliers are currently delivering. If there is widespread agreement that they are not translating their capability into effective delivery and value for money then you are more likely to get support for your programme.

·        The maturity of your organisation in terms of its approach to problem solving.  SRM is largely about identifying and solving problems and this is made easier if there is already a culture of continuous improvement in your organisation supported by appropriate processes and toolkits.

·        The strength of procurement leadership in your organisation. If there is a central group of high calibre people who are well connected to and supported by local procurement people within the business units of your organisation then SRM becomes easier to drive and coordinate

What’s your view?  What do you consider to be good SRM and can Procurement do it alone?

Are your suppliers out to get you?

The giant supplier is coming down the hill looking for the timid buyer and crying out “Fee, fie, fo, fire, I smell the blood of the timid buyer (give me a break, can you find a better word to rhyme with buyer?!)” while the buyer is quaking in the bushes hanging on for grim death to his golden goose (sorry, budget). 

OK, so plagiarising Jack and the Beanstalk doesn’t entirely work in depicting how relationships work between suppliers and buyers.  But to judge by some buyer behaviour you would think it was true. 

This then begs the question, “Why do you need supplier relationships at all?”

 “No firm is an island. Your customers depend on the excellence of your suppliers … Top firms create supplier alliances to ensure that their customers return” says Professor Daniel T. Jones

The quote from Professor Jones succinctly demonstrates that organisations can no longer operate in isolation, if indeed they ever could. The question is who should be your alliance partners? 

Even with initiatives such as supplier base consolidation, large organisations in particular typically will still have several thousand suppliers. Obviously, you can’t form alliances with all of them. You will need to segment your suppliers in order to identify the ‘critical few’ that merit some form of alliance or partnership working. 

Even without this kind of analysis, some suppliers will immediately stand out as worthy of some kind of closer working relationship. These include:- 

• Suppliers to whom you have outsourced part of your organisation

• Joint ventures in which you share assets and resources to create value

• Critical services or materials without which your organisation cannot function.

The implications of poor performance from these types of supplier can be devastating.

So, what do you think?  Is SRM just some fad dreamt up by consultants with new methodologies to peddle or suppliers who want to “get one over on you”.  Post your thoughts.