Daily Archives: November 4, 2016

It’s 2016! Welcome Back to the Industrial Age of SRM!

State of Flux just released their 8th annual supplier relationship management research report entitled Digital SRM: Supplier Relationships in the New Technology Landscape and while it reveals the handful of leading supply chain organizations are, or are moving towards, digitization, it reveals the majority of organizations are not only stuck in the past, but moving back towards the industrial age in their supplier (relationship) management processes. Scary!

So scary in fact, that I hope that the purchasing wizard Pete Loughlin of Purchasing Insight does a follow up to his piece on how we are now arriving in the digital economy – turn your watch back 40 years entitled we are moving forward in the digital economy, turn your watch back another 40 years because some of the practices many global organizations are still practicing with respect to supplier relationship management could literally be straight out of Marshall Monroe Kirkman’s classic The handling of railway supplies. Their purchase and disposition.

And I’m not joking.

Many organizations are still doing nothing more than inviting bids by public advertisement for a year’s supply and taking the advice that the pulse of the market should be continually felt and, clearly, not thinking about the importance of managing relationships after the purchase order is cut.

And while it looked like we are making progress last year, the simple facts that:

  • the number of businesses failing to invest in any SRM-related training rose from 26% in 2015 to 39% in 2016
  • 80% of companies are not achieving on-going benefits from external spending (compared to what they could be)
  • 87% of companies are still using Excel (which is essentially just an electronic version of a general ledger at most companies) as their primary SRM tool

demonstrate that, for the majority of organizations, the digital age (which for the consumer has been here for almost two decades) is still decades away.

After all, why are Purchasing Manages still panicing when they receive the 2:00 am phone call from the CFO informing them that their primary supplier in China just filed for bankruptcy and the company needs to know ASAP what the impact will be. If they had modern supplier relationship management systems, it wouldn’t take them 48 sleepless hours pouring through accounting systems, ERP systems, and spreadsheets to figure out what products come from the supplier. With modern supply management best practices it wouldn’t take them weeks to identify a new supplier and months to switch. And with good supplier relations, they definitely wouldn’t have to absorb the price doubling mandated by the receivership for continued supply of the critical product lines.

With proper supplier relationship management, you know as much about the (financial) health status of your strategic supplier as you know about your own organization. With proper supplier relationship management, you know all the products that are being provided, in what volume, in what consumer product lines they are being used, and what the impact of a stockout or termination of the line will be. With proper supplier relationship management, a company knows which other suppliers it is using that could also produce the product, how long it would take to switch, and how much it would cost. And with good relations, the last thing the supplier personnel would be comfortable with is charging their best customers an unexpected, possibly contract violating, unmitigated price increase, and would fight any suggestions by the receivership management to increase prices to any degree.

And the sad thing is there is no shortage of basic SRM systems these days. Not all are industry leading like (and not all will deliver anywhere near the value of) State of Flux’s Statess solution, but there are so many ways for an organization to enter the digital age that it’s shocking just how hard they fight to stay in the industrial age.

Hopefully, now that the results have been demonstrated for eight years in a row, they’ll finally accept SRM is not a passing fad, its the foundation for a new reality, buy in, and go for it. At the very least, hopefully they’ll check out Digital SRM: Supplier Relationships in the New Technology Landscape and realize what could be.