In a recent article by Supply Chain Management Review, Robert Rudzki states that Supplier RelationshipManagement (SRM) adds unneeded complexity to the supply management process. Mr. Rudzki is right that SRM can be complex, but for large organizations that rely heavily on third party suppliers, the regulatory environment demands a logical, ‘auditable’ program to demonstrate a strong governance of the supplier network. Given that, the beauty of an SRM program is it’s entirely scalable in nature. By segmenting the supply base according to risk, potential strategic value efforts can be placed where needed to gain maximum return. At its core, an SRM program is much more of a cultural shift in management attitude towards suppliers. The goal is to develop a set of common practices with the aim of collaboration for best value. Tools and oversight models abound, this work becomes much easier for practitioners. So it’s really about finding the right mix of tools and activities for your firm to maximize return.
However, to simply assert that something is complex in nature does not mean that it’s not a worthwhile endeavor. The evidence is overwhelming — firms who invest in SRM programs achieve a significant ROI. In fact, companies considered to be on the leading edge of SRM best practices see an average of 20x return on investment versus those who only ranked average. Bottom line: adopting the best practices possible for your organization can yield a significant return.
It is logical to expand the role of sourcing beyond the buying portion of the supplier life cycle. Sourcing departments and CPOs have realized the need to move into post-contract, value-generating activities in the form of SRM. SRM takes the previous sourcing attitude of relying on competitive pressure and lowers bid and replaces it with working collaboratively with suppliers to understand their strengths and needs, reduce waste, and redefine specs all in the name of gaining efficiencies for both parties. So I think the question is not about whether SRM adds unneeded complexity, it’s about how to easily scale it for your firms goals and willingness to invest. A strong, well defined pilot program can help to promote the SRM benefits.
Source One Management Services, LLC is a highly experienced strategic sourcing and procurement consulting firm, working as an extension of their clients’ teams and supplementing their time, expertise and resources with experience, market intelligence, technology and people. For more information about our Supplier Relationship Management services, download our SRM Insights Report at srm.sourceoneinc.com.