New supplier management techniques in procurement deliver enhanced value to the business by focusing on relationships.
Relationships require time and effort to be successful, and supplier relationships are no exception. Yet only a small number of organizations claim to have mastered the 80-20 rule—their procurement teams have 80 percent of their spend concentrated on 20 percent of their suppliers. A large number of procurement teams miss opportunities and fail to connect effectively with suppliers with efforts are spread too thin.
More and more procurement teams are implementing Supplier Relationship Management (SRM), a popular practice that takes an enterprise-wide approach to supplier management. SRM delivers a true partnership model that assesses how suppliers fit into the overall business strategy and requires procurement leaders to focus on managing imperative relationships throughout the entire product’s lifecycle. This tight-knit relationship model can help businesses reduce costs and risks, increase contract compliance, and achieve performance objectives.
Today’s complex and fast-paced global marketplace makes supplier relationships paramount.
"The reliability on third parties and suppliers has increased significantly in the past 15 to 20 years. Your ability to manage them and become a customer of choice is now critical if you want the best value.” — Christopher McClory, Director, Procurement & Operations Advisory, KPMG US
Big-name companies like Procter & Gamble, Cisco, Dell, FedEx and Microsoft embrace next-generation SRM,1 and a 2018 poll by APQC found that 80 percent of organizations have now implemented or are likely to implement SRM in the next two years.
SRM implementation starts by assessing your overall risk strategy and reviewing suppliers against a list of potential risk factors, which can help to focus procurement’s time and energy. Once procurement determines their optimal partners, leaders should complete the following practices to help foster long-lasting supplier partnerships:
Procurement teams that prioritize growth, innovative and risk management into their supplier relationships yielded savings that were 26 percent higher than teams that focused solely on price reductions.2
Explore the key elements of SRM, including identification and management of supplier risk, in “Changing supplier relationships in the digital age.”