What answers would you give?

1. What cost savings have you achieved in the last year - 20%, 30%, 50% or more?
2. Have you made any radical changes to your supply chains in the last 12 months? How as it improved service and/or lowered costs?
3. How do you challenge your suppliers’ prices? Are negotiations and competitive tendering your only tools?
4. Do you systematically and regularly collect data on the total cost of acquisition and use of the things you buy? How do you use this infomation?
5. How does the rest of the organisation view the procurement department? Do they see it as adding a true competitive advantage?
6. What do your suppliers think of the way you deal with them? How do you capitalise on this?
7. Are you the first organisation that your suppliers come to with new ideas? What radical innovations have they brought to you in the last 12 months?
8. What % reduction have you achieved in your supply base this year? How does this support your business strategy?
9. How many people are involved in procurement in your organisation? Is this too few, too many or just about right?
10. Does anyone outside the Procurement department commit your organisation to expenditure with suppliers? if so, how do you make sure that money is spent wisely?
11. How do you know if your procurement people have the right mix of skills and experience for your business? Do you benchmark roles, responsibilities and abilities?
12. How do you go about updating the skills of people in procurement? Do you have a programme in place to meet the requirements from a training needs analysis?
13. It has been said that the best form of buying is not to buy in the first place. How do you challenge demand for purchased goods and services in your organisation?
14. How do you challenge the specification of the things you buy?
15. Do you have a structured process in place to systematically improve your supply base?
16. Do you know where all of your supply bottlenecks and risks are? Do you have a disaster recovery plan in place?
17. How do you measure the improvements your people make to business performance? Do you benchmark this and identify any gaps?
18. When was the last time you reviewed your processes and procedures? Do they still support the ways in which you need to work? Do they ensure that “best in breed” ideas and practices are applied consistently by all buyers?
19. Is your IT system capable of giving you all the information you need to manage Procurement/
20. You have Procurement under control. Quality and delivery are good and costs have been reduced. What do you do next? Do you have a vision and plan that has been agreed by the business?

How well do you think you and your colleagues would fair if your Financial Director asked these questions of you?

You calculate it by dividing the total value of the revenue you receive from a sales channel and by the total number of customers in that channel.

But like all averages it has its dangers. If customer A spends £120 a month and customer B spend £80 then the ARPU is £100. Decisions made about the relative merits of each customer might lead to the wrong conclusion.

Still, it has a certain merit in that it gives you a basis to compare different strategies and is easy to calculate.

So, could it be used for Procurement? Would the average spend per supplier , buyer or employee tell you anything useful?

Perhaps not in itself … but used as a benchmark to compare organisations in the same sector it might be of value. If two Local Authorities has spend of £20m per buyer and £50m per buyer, would this prove a useful starting point from which to investigate differences in practices, systems or approaches?

What do you think? Please post your comments and suggestions below.

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?

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.