Category Archives: Supplier Management

Your SRM is in a State of Flux. Shouldn’t You Find Out Where?

Last week we reminded you about State of Flux, a provider of Supplier Relationship Management (SRM) software and services, and the initiators of the SRM Research Report that we highlighted in our 3-part series on why you should focus on essentials, plan against the pillars, and be a customer of choice.

Your supply chain success is ultimately dependent on your supply base and their failure is your failure. Your customer doesn’t care why the order is late. He just cares that the order is late. Your customer doesn’t care why the product is crap. He’s just upset that he forked over good money for bad product and only cares what you are going to do about it. Thanks to omni-present supply chain disruptions that are increasing at a rapid rate (to the point that less than 15% of companies will not experience a major supply disruption over the next 12 months), something is going to go wrong. And the question is, do you have a good relationship where your supplier will proactively notify you of a potential disruption so that you can collaboratively work together to prevent it, or a not-so-good relationship where you won’t know the shipment isn’t coming until it’s two days late and someone calls the supplier who admits that, because of a missing raw material shipment, production line breakdown, or simply poor scheduling (which lets you know how important you are to them as a customer) it just isn’t coming.

Unlike RFX or e-Procurement, for which there are a plethora of good platforms that walk you through good workflows by the hand and make it hard for you to do it wrong (although they don’t prevent you from designing the process or event wrong), there are not as many platforms for SRM, and SRM cannot be fully automated. SRM is more than just performance monitoring and corrective action management, it’s also nurturing, development, and partnership. It’s a good process, with appropriate best-practices embedded within, that focusses on the soft factors as well as the hard factors.

But what the the best-practices that are appropriate for your organization? What’s the right process? How do you get started? And, more importantly, how badly are these needed? Unless you want to wait until a major disruption or disaster occurs, that could have been prevented with a better supplier relationship, the only way to find out is to measure up against your peers. Probably the best way to do this is to proactively participate in the 2015 State of Flux SRM Research Report and get the full results ahead of the market. Time is running out to complete the SRM Survey, which, in it’s seventh year, is focussed on helping you get executive sponsorship and support for your SRM initiative.

Follow the bright blue hyperlink today and take the 2015 SRM Survey today. Given the depth (and breadth) of work consistently produced by State of Flux (compared to the average over-priced and under-researched analyst report), the 45 minutes of time that is required makes the effort infinitely more valuable than the cost.

State of Flux Fooled You

Is Your SRM in a State of Flux? Maybe You Should Find Out!

Earlier this year we introduced you to State of Flux, a provider of Supplier Relationship Management (SRM) software and services, and the initiators of the SRM Research Report which we highlighted in our 3-part series that highlighted why you should focus on essentials, plan against the pillars, and be a customer of choice.

SRM is very important because supply chain success is ultimately dependent on your supply base. Your organization can have the best marketing and packaging in the world, but if the supply base delivers products that are rubbish, your organization’s brand reputation is tainted, and the damage can well exceed even double-digit savings identified during the sourcing phase.

But it’s not easy to effectively manage supplier relationships because SRM is more than just performance monitoring and corrective action management, it’s also nurturing, development, and partnership. Furthermore, effective SRM requires quite a bit of work to get a proper framework in place (as reinforced by Sigi Osagie’s recent Procurement Mojo), which will need to be implemented while keeping the ten essentials in mind that were highlighted in State of Flux’s 2014 SRM Report (and summarized in our post on the essentials).

And it’s even harder to find out how well you are doing until, of course, a major disruption or disaster occurs when a shipment doesn’t arrive or, even worse, arrives with a 10%+ defect rate (because, otherwise, it seems like everything is hunky-dory even when the relationship is spiralling out of control). But there is a way — you can proactively participate in the 2015 State of Flux SRM Research Report and get the full results ahead of the market. You can measure yourself against your peers, find out where the market is, and get the first insights into new best practices.

You have until June 26, 2015 to complete the SRM Survey, which, this year, is focused on helping you get executive sponsorship and support for SRM. Executive sponsorship is critical because SRM needs to be viewed as an organization enabler for the required transition management program to be adopted and enforced.

While this survey will take 45 minutes of your time, the reward is infinitely more valuable than the cost. This year’s publication was one of the most comprehensive compendiums of SRM insight ever produced with 216 pages of data, results, and expert interpretation. Imagine the value that will be yours, for free, as a participant in the seventh annual study.

So, take the 2015 SRM Survey today. Given the depth of the work consistently produced by State of Flux compared to the average analyst report, you won’t regret it!


Forget SIM. The Real Answer is SIR.

Earlier this year, Spend Matters ran a post by Jason Busch on Why Collect Supplier Information that highlighted some of the information needs addressed in a recent piece by Mr. Busch and Mr. Gustin on “Supplier Enablement for Invoice Discounting and Supply Chain Finance: Background, Tips, and Secrets for Success” that not only highlighted some of the needs for detailed supplier information but also outlined many other reasons why organizations need supplier information.

The traditional answer to this is Supplier Information Management (SIM), implemented by way of a supplier portal where suppliers provide, maintain, and verify their information to the buyer on an as-needed basis. While this sounded like a good solution, especially since the amount of information some buyers need to collect on a single supplier can be staggering, which makes the task almost impossible for a large organization with thousands of suppliers, all it does is shift the burden to the supplier. The rationale provided was that the supplier, who needs to sell its wares, would accept it as a cost of doing business, especially since the supplier would need to provide much of that information on an RFX anyway and this way only has to provide the information to the buyer once as it would be maintained and reusable on every future RFX or information request.

This sounds fine and dandy, but really only makes sense if the workload for the supplier is less than the workload for the buyer. Otherwise, the work is just being shifted, overall supply chain efficiency is not increasing, and cost is not being take out of the supply chain. And SIM is not delivering on its promise.

The reality is that the workload for the supplier is not decreased because, with the proliferation of SIM systems across Procurement, more and more organizations are asking more and more of suppliers. And the perception that the supplier has less customers than the buyer has strategic suppliers is not always correct. Since most large buyers with risk avoidance tendencies only buy from large suppliers, and since suppliers can only become large suppliers by attracting a large client base, the supplier has as many buyers as the buyer has strategic suppliers — and the supplier has just as much data entry and maintenance to do as the buyer did before the buyer purchased its SIM solution. The work hasn’t been minimized, only shifted, and the cost has only increased because the supplier’s cost of data maintenance is no less than the buyer, and the supplier will just add a mark-up to cover their cost.

The true answer to the supplier information problem is not a SIM solution, but a SIR solution — an on-line, shared-access, Supplier Information Repository where a supplier can enter all of their information once, maintain it, and, under a fine-grained security model, share it with their customers (the buyers) on an as-needed basis. This reduces costs for all parties and truly takes costs out of the supply chain as the supplier only has to maintain one set of data, and the buyers can access all data from all suppliers for one low-cost annual subscription, which, because a vendor does not have to maintain multiple SIM instances, allows the vendor to offer repository access at a cost that is less than the cost of a traditional SIM solution.

Is Your SRM in a State of Flux? Maybe you need to be a customer of choice!

Right now you are probably thinking that you are a customer of choice with your most strategic suppliers because you went through an in-depth, multi-stage, strategic sourcing event, spent a long time qualifying the supplier and emphasizing that the buy was significant and makes your organization a customer of choice, and inserted language into the contract that said you were a customer of choice and will always get preferred pricing at least as good as other customers of the same size for the same products. But are you really a customer of choice?

A supplier’s customer of choice gets more than good pricing. That customer gets preferential delivery (if inventory gets low or transportation options become limited due to strikes or other supply chain disruptions). That customer gets suggestions on how it can help the supplier serve the customer better (through timely order placement, different delivery schedules or options, or slight alterations to specifications that the supplier can produce faster or cheaper). That customer also gets first access to supplier innovation (that would allow it to use new production lines or technologies to produce superior or significantly cheaper products using different materials or production techniques). And, sometimes, it even gets operational insight into how to streamline its logistics on the sell side from the supplier. The reality is that if you’re not getting this from your supplier on a regular basis, even if you are getting what you perceive to be competitive pricing, your organization is not a customer of choice.

Why do you want to be a customer of choice? The recent Global SRM Research Report by State of Flux found that many of the organizations that were leaders, fast followers, or that realized returns that were greater than the average return in their category had one thing in common — they were all perceived as a customer of choice by their most strategic supplier(s). Also, the study found that one market segment not only understood this need better than other segments but also better understood what the requirements for being a customer of choice truly were. Can you guess which segment it was? Contrary to what your intuition might be, it was not the segment with the best cost performance in their market or vertical. It was, in fact, the producers of luxury goods who often saw more value in working with a supplier who treated it as a customer of choice and went the extra mile to understand the organization’s brand and market segment than with a supplier who could cut costs. And while it might be counter-intuitive at first that these organizations often saw more value when they paid more, when you consider that luxury good producers profit by expanding their market share to people who care more about brand and quality than price, and will pay more than necessary for the product they are buying, these companies can often profit much more by selling more units at higher double (or triple) digit markups than by saving a couple of percentage points on the unit cost.

Thus, while cost reduction and control is important to the average company, if a company wants to realize long term success from its SRM efforts, it needs to take a page from the luxury brands’ playbook and make sure it is a customer of choice with each and every strategic supplier it does business with. (The Global SRM study found that more luxury organizations were regarded as a customer of choice than any other organization type.)

Why are luxury brand organizations so successful at becoming a customer of choice? While it’s hard to zero in on just one activity that they do differently that makes a difference, there are a set of activities that, collectively, cause these luxury brands to stand out with the average supplier:

  • They proactively listen to suppliers.
  • They use collaboration to innovate.
  • They work hard to create supplier loyalty.
    — AND —
  • They recognize they are only as good as their worst supplier.

And the best part is that there’s nothing unique or special about these activities that limit them to luxury brands. Any organization that truly wants to be a customer of choice and is honestly willing to work with its suppliers can pull these activities off and become a customer of choice.

In other words, there’s no reason for your organization to be in a State of Flux when it comes to SRM. The recipe for success is easy to understand, it just takes hard work, adaptability, and perseverance to master the art of the relationship soufflé.

Is Your SRM in a State of Flux? Maybe you need to plan against the pillars.

In our last post we reminded you that State of Flux is a global leader in Supplier Relationship Management (SRM) research that has been producing the Global SRM Research report for six years. Their most recent report, which is thicker than many (e-)books, should be seen as 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 as only 17% of companies fall into the emerging leaders category and only 21% fall into the followers category, which, using the classic Aberdeen Model, says that these companies are average at best (and, to be blunt, average companies are not very good at SRM). This also means that 62% of organizations really have no clue what SRM is, why it is important, and/or how to get it right. Given the percentage of spend that the average organization directs to suppliers and other third parties (which is as high as 80% in some verticals), this is not a good thing.

The good news is that it’s not hard to be above average in SRM. All it requires is a little (okay, a lot of) elbow grease, a focus on the essentials, the implementation of good processes and supporting technology, and a plan to address the critical gaps against each of the six pillars of SRM. A company that focusses on the essentials, identifies processes and platforms to address each critical gap, implements those processes and technologies, and makes steady progress will likely find that it goes from “needs improvement badly” to “above average” in 12 to 24 months, depending on the organizational commitment and resources dedicated to SRM.

So what are these six pillars?

  • Business Drivers & ValueLike any Procurement function, success ultimately depends on alignment with organizational goals and key business drivers.
  • Stakeholder Engagement & SupportStakeholder engagement must be proactive, include internal stakeholders and executives and key supplier personnel, scheduled, tracked, and managed like any project as each key stakeholder, if she is doing her job, will provide input and insights critical to realizing value from the supply base.
  • Governance & ProcessJust like categories and sourcing events, SRM needs to be managed against a model or plan to be successful. Formal governance methodologies and processes need to be defined, tools need to be implemented, and adherence to process needs to be monitored.
  • People & SkillsRelationships are always between people. It’s critical that an organization not only identify the best people, but place them where they can have the biggest impact. This requires identifying people who are not only strong in EQ, but who have the IQ necessary to manage the projects associated with the supplier that may require a strong technical background in one or more areas.
  • Information & TechnologyThe reality is that there is more than one supply chain. There is the physical supply chain through which goods flow. There is the financial supply chain through which money flows. And there is the information supply chain through which all of the information needed to manage the physical and financial supply chains flow. This is the most critical supply chain from a SRM point of view as you have to capture requirements, performance, and capability data on a regular basis in order to properly manage a supplier relationship.
  • Relationship Development & CultureManaging is just the first step in a good SRM program. The most successful relationships are those that are collaborative, innovative, constantly improving, and mutually beneficial.

A significant amount of work might be required to identify (and then implement) the actions that need to be taken to achieve a sufficient level of competency, but its a lot easier to do so with a high-level game plan, which the pillars provide, than it is to start from a blank slate.