The A to Z of SRM?
Add comment March 24th, 2008 Sean Delaney - Iasta UK
I have been desperate to take some time to read this article in SM on the A to Z of SRM. It is a big topic anyway but I was still hoping that It would offer some clarity on what is SRM. However, it gave me a lot more. During a recent SRM conference in Geneva, the speakers outlined how they interpreted SRM within their organisations and what benefits it gave. Let me summarise, by speaker:
BP, Bill Knittle – he believes that successful SRM programmes “require about 70% behavioural change and 30% process adjustment”. Bill went on to say that it had taken between 24 to 36 months before he could get suppliers to talk. Success must be linked to organisational goals like shareholder value which will reward innovation, growth and efficiency. Finally, Bill observes that Relationship management skills require a totally different skill set.
I totally agree with this ideology. Procurement can learn so much from their Sales & Marketing brothers across the desk. There are those who are good at acquiring business, and those who are better at managing the business….Hunters v’s Farmers. The “levers” that Bill adopted to reward suppliers are interesting, but in reality, with such a large organisation like BP, one suppliers efforts will have minimal impact…I would like to know more about the exact mechanism for measuring performance, as I feel this should always be realistic and achievable.
AVIVA, Sheilagh Douglas-Hamilton – SRM function is a department within procurement. Sheilagh suggests it is all about getting a deeper relationship with your suppliers and tapping into their resources like innovation and design. AVIVA have realised savings of £100m directly from SRM activity. What is interesting is that Sheilagh agrees with Knittle, that SRM managers need different skills than Category Managers.
Again, I would like to know more about how that £100m breaks down and by what mechanisms this benefit measured. What is really interesting is how AVIVA have organised themselves to manage SRM, and again, the different skills required.
BUPA, Steven Pink – Steven’s thoughts on SRM are much more simplistic and he gives the example of when he joined the business from BA there was an adversarial approach to suppliers. He summarises be saying their objectives were to align goals and create more efficiencies between both parties.
I think there is more to this – again what levers were used to measure and encourage a change in behaviour? This is starting to sound like the old Partnership agreements that were common during the late 80’s and early 90’s.
Diageo, David Lawrence – David suggested that SRM could be improved by reducing audit fatigue. David suggests this could be achieved by collaborating with other buying organisation in their sector. They use the International Labour Organisation conventions and the UN global compact as platforms to qualify suppliers.
I agree wholeheartedly with David’s sentiments to reduce audit fatigue. However, I do not believe alone that this constitutes SRM. I believe there are now automated processes in place to make measuring far simpler. Furthermore I also believe that SRM is not only about working with the large suppliers but also nurturing the new, small and innovative types as well. After all, sharing the same supply base with your competitors does not give you competitive advantage.
MacDonald’s, Joseph Youssef – Joseph believes that SRM needs executive sponsorship and a long term approach. It helped McDonald’s create greater visibility in the supply chain, foster innovation and for suppliers it allowed them to reduce costs by eliminating needless sales activity. Joseph interestingly pointed out that the focus shouldn’t be on the big picture and should focus on “one area at a time”. Benefits achieved from SRM activity have been $3.5m per year over the past 4 years.
This is interesting and quite different than BP which clearly focused on the bigger picture. Executive sponsorship is mentioned for the first time, but in all these organisations SRM wouldn’t have dedicated resources without it.
British Airways, Paul Alexander – BA were motivated to focus on SRM firstly after industrial action within the supply chain and secondly due to lack of competition within the supply chain. Paul believes that SRM will have a major part to play in the future because BA’s experiences will be felt by many more as scarce resources become scarcer
This is interesting perspective in many respects BA could be ahead of the curve in their thinking here. However, after reading this extract, I couldn’t help but feel that this had the look and feel of one of those Partnership approaches, rather than SRM. Also, should SRM be driven by “well, we have no other option”, or more about making both organisations more competitive?
This article has certainly given me food for thought. Is SRM just an advancement on the Supply Partnership theme used in the late 80’s/90’s? What mechanisms should be used to measure and change behaviour? Should it be less measurement based to avoid audit fatigue?
However there are some common themes here:
• Executive Sponsorship
• Dedicated resources to SRM
• Mirror Customer Relationship Management in your SRM methodology and approach
• Use some measurements to change behaviour and align goals
• Regularly update success criteria so it is aligned with the organisational goals
What is still unclear is:
• What measurements should be used?
• How much measurement?
• Is it a Partnership or something different?
Entry Filed under: General, Interviews, Supply Management Best Practices
