Recently we introduced you to State of Flux and their Statess solution for Supplier Relationship Management (SRM), which, despite its recent market entry, is a relatively mature SRM solution as it was built on eleven years of best-practice SRM consulting and over six years of SRM Research. However, we did not cover their consulting services or research services in that series, which also differentiate them from their peers.

As per our previous series, State of Flux has been producing a Global SRM Research Report for six years, and their 2014 report summarized the results of a survey that was responded to by over 500 global organizations, including 454 buy side companies, that collectively provide deep insight into what makes a leader, a fast follower, a follower, or an average company that needs development (which is where 62% of companies fall) where SRM is concerned. (In other words, when it comes to SRM, using the classic Aberdeen groupings, 17% of companies are best-in-class and [emerging] leaders, 21% of companies are average, and 62% of companies are laggards.) This study, which is thicker than many (e-)books, is a wake-up call to organizations that claim they understand the importance of suppliers and relationship management, but really have no idea what relationship management means and what is involved to get it right.

In our next post we’ll discuss the six major pillars of the SRM maturity model put forward by State of Flux, which provide a solid foundation for any organization wanting to measure its progress on its SRM journey, but first we’re going to highlight the ten SRM essentials summarized in the executive summary and dive into those essentials that SI deems most critical (as they support the other essentials and more advanced capabilities). Why? Unless an organization addresses each of these ten essentials, its performance against one or more of the SRM pillars will be limited, and it will never achieve true excellence in SRM. (In other words, these ten essentials address necessary conditions of SRM success.)

• Benchmark where you are now.

  An organization that does not understand where it is, how its definition of SRM aligns to the corporate strategy and business drivers, and where the biggest gaps are will not be properly focussed and it is unlikely that it will align suppliers to the business.

• Prioritize the gaps according to their impact on business drivers.
• Define metrics and KPIs that quantify the financial and non-financial benefits and capture them on a regular basis.
• Engage proactively with all stakeholder groups in a two-way dialogue.
  For a SRM activity to be deemed successful, the needs of all major stakeholders need to be met. This means that they need to be properly defined and understood at an organizational level, not just within an individual organizational unit.
• Listen to suppliers.

  Understand how they perceive you as a customer, where they think you can improve, and what innovation they can offer you. This is key to defining appropriate development programs and effective performance measurements.

• Properly segment your suppliers into critical, strategic, and non-strategic
  and then into sub-groups that would benefit the most from a formal SRM program and those that would benefit the least. It’s important to focus limited resources and efforts where they will have the most impact.
• Ensure SRM is properly defined and attracts the best talent for the job.
• Information is at the heart of relationship and performance management.
  Implement proper systems to capture, analyze, and distribute that information.
• Take a proactive, collaborative, approach to relationship development.
• Leverage sell-side strategic account management.

It’s not a complete list of tasks, or areas, but a fundamental list that provides a solid starting point for your organizational effort.