In Part I we noted that while State of Flux had the treatment, before we could talk about the treatment, we had to talk about the ailments, but before we did that we needed to give a bit of background on the recent State of Flux SRM event in Chicago which was the US launch for their most recent Global SRM Research Report, The Business of Supplier Relationships (which is their 7th annual research report on the subject). But before we could talk about either the event or the research, we needed to start with the need — which we nicely summarized using the research from Planning Perspectives who have independently found that not only does gross profit increase as working relations improve, but that 71% of the positive change is contributable to changes in the supplier relationship.
Then, in Part II, we gave additional examples of the value that can be obtained from good supplier relationship management (SRM), noting that a major oil and gas company extracts almost 1 Billion a year from its advanced SRM program while a major global electronics giant also extracts hundreds of millions from its SRM program. After this, we told you that while we don’t have permission to release specifics, we can share the general advice on how to structure a program and when you combine the basics covered in both presentations, which are quite similar, you can easily outline the foundations of a good SRM program.
Identify methods to capitalize on them.
Do it. Select the best method and go.
Overse the process. Don’t just set and forget.
Accelerate implementation as circumstances permit.
Rsward success through recognition and remuneration.
Cooperate and collaborate at all times.
However, just knowing the basics is not enough. One needs to know how to put them into action and how to best capitalize on the opportunities available. In this post, we’ll present some of the best tips and tricks. Some will seem obvious, some not as obvious, but all are easy to implement and capitalize on.
Involve Suppliers From the Get Go
Don’t wait until after your supplier relationship management program is fully formed to reach out to your first supplier. Reach out to your strategic suppliers during formation of the program and ask for their input and help in creating the program. This will hasten your suppliers’ acceptance of the SRM program once it goes live and possibly give you some great insights that you can use to get a jump start on results from day one.
Align with Key Stakeholders
Success requires a unified front on the buyer’s side. This requires buy in from all key stakeholders, so align with key stakeholders before finalizing the SRM program and going live. Get buy-in and, more importantly, use these stakeholders to help get executive approval.
Start with a Pilot
Select a small group of key, willing, suppliers — preferably including some you engaged from the get go — and work-out the kinks before trying to go broad on a supplier relationship management endeavour. The last thing you want is to expand an inefficient program or replicate practices that have unexpected adverse or side effects. Get it right. Get it smooth. Then take it broad.
Challenge Suppliers to Solve Stakeholder Pain Points
It’s not just about savings, it’s also about value. If the stakeholders want new functionality in that electronics product, a more sustainable production method, a leaner production method that will allow for faster design (and line) changes, or the introduction of more environmentally friendly materials, challenge the supplier to come up with solutions that support this. This will help Procurement to not only secure the support of key stakeholders but to report wins early on in the initiative.
Regular, Positive, Supplier Feedback
Regular feedback is key to maintaining a good relationship. However, it’s important to make sure that the feedback is not just negative, what the supplier is doing wrong, but also positive, and what the supplier is doing right, and how they can build on this to do even better. It’s the old saying — you catch more flies with honey than vinegar.
Instill Relationship Management in the Supply Base
Make sure they understand that relationship management is about relationships, relationships are a two way street, and that it is up to them to manage their side of the effort. Moreover, they should take what they learn and use it in their supplier relationship management efforts to get better results from their suppliers, and push value further into the supply base.
These simple techniques, discussed at the State of Flux Chicago event, will go a long way to making your SRM efforts a great success.