Supplier Relationship Management: The Technology (Part 4)

This blog - the fourth in a series of four - comes to us from Jim Baehr

The first rule of any technology used in a business is that automation applied to an efficient operation will magnify the efficiency. The second is that automation applied to an inefficient operation will magnify the inefficiency

- Bill Gates

Information technology is too often seen as the elixir for procurement related tasks.  Supplier Relationship Management is one of those tasks.  The SRM process itself is not at the top of the list but it’s close.  Per the Deloitte Global Chief Procurement Officer 2017 Survey, 26% of CPOs are intent on delivering value by increasing supplier collaboration, an outcome of good SRM.  Technologies are expected to play an important role in supporting SRM.  The technologies that are available are increasingly robust, cloud based and very capable of making a difference.  But - not to be critical - how much SRM software is in use and being applied to even 50 % of its capacity?

Before going further, a question - is contract management critical to effective SRM?  It can be safely stated that contract management is a core activity in the post-award SRM process. Next question - does your group have a contract management tool in place?  If yes, congratulations.  Does your enterprise use it?  Effectively?  Why all these questions about Contract Management when the topic at hand is supposed to be about SRM technologies?

One of the primary reasons for a contract is to ensure the buyer and seller are on the same page.  Contracts help create boundaries. Contracts set expectations. Contracts are a relationship roadmap. It’s difficult to perform Supplier Management if the basic Contract Management disciplines aren’t in place.   Contract Management systems provide visibility, support basic transactions, and can improve compliance which limits contract leakage. This is basic day-to-day stuff.  How can you initiate discussions on collaboration or innovation if you don’t manage the basics?  An effective Contract Management process/system is a prerequisite for effective Supplier Management.

Technology is the biggest influencer of today’s business.  It can automate every facet of the end-to-end supply chain. And, Artificial Intelligence (AI) is already playing a role.  Buyers and Suppliers want to deploy IT systems that enable them to collaborate in different ways - from sharing transactional purchase order data to collaborating on major projects or new product development. Surely, there are relationships benefiting from the deployment of collaborative technology platforms.  But, how many?

Applying the 80/20 rule it’s probable that top twenty percent of Supply Management organizations are using SRM technologies to do bigger, better and faster.  But what about the 80% that are trying to make SRM happen but are challenged? They’re challenged for resources - both people and funding. And, they’re challenged for IT support on SRM technologies.

At present, IT based SRM technology can be an important enabler for value creation.  IT based tools can bring transparency, enable awareness and deliver process efficiencies. But, implementing software doesn’t add value just because it’s there. For technology enabled SRM to add value the emphasis needs to be on transparency and access to the information for all parties involved.  This creates awareness of the state of the relationship.  Awareness becomes understanding and this understanding must be communicated to both internal and external stakeholders to deliver any meaningful benefit.

All the above are difficult to make happen using spreadsheets, surveys and manually generated scorecards.  Monitoring, measuring and tracking are process dependent. But, even more so, in today’s world, systems dependent. Trying to manually support SRM may have been a good thing twenty years ago but it’s now a fool’s errand.  Without technology it’s labor intensive, opaque, and almost certainly counterproductive. Having said all this, if you are operating with a manual process, it at least shows an understanding of the importance of SRM and its benefits.  A manual process can also help in defining the requirements for an automated one.

There’s an interesting twist in this matter of relationship management and technology.  While Procurement groups struggle for funding Sales groups do not.  Per Gartner, Inc., “at the end of 2017, worldwide Customer Relationship Management (CRM) software revenue overtook that of database management systems (DBMSs), making CRM the largest of all software markets”.  Seems that there is a very strong commitment in business to CRM products.

Regardless of where you are in business - Sales, Procurement, or otherwise, most people have at least heard of Salesforce.com - a CRM platform.  Its cloud-based applications cover sales, service, marketing, and more.   CRM systems have been around longer than SRM systems.  CRM starts before the first prospective customer contact.  SRM starts at the contract. CRM is seen as focused on building and maintaining relationships.  SRM is seen as focused on measuring performance and at times used as punitive.  CRM is considered a “must have” process regularly supported by
technology.  SRM is considered a “nice to have” process that is sometimes supported by technology.

On the Buy side of the equation – we need to convince ourselves of the importance of SRM. We need to understand how the process enables sourcing strategies. We need to demonstrate that the process has value.  We need to sell SRM’s value - both internally and externally. And then, maybe we’ll see a commitment to investing in SRM technologies.  The sooner we do this, the better!

Jim Baehr is the Lead for the Sourcing Strategies Group, LLC (SSG) supporting the Supply Management needs of clients in both the Public and Private sectors. He's also aligned with Source One, a Corcentric company, as a Senior Advisor.

His recent corporate roles were as VP of Global Information Technology Procurement Reed Elsevier, and Director of Technical & Services Procurement for Bayer Corporation. Jim has extensive experience in IT management positions and an accomplished career in Sales.

Jim is the Past President of ISM - Pittsburgh and a member of the Board of Governors of the Joint Chemical Group of Pittsburgh.

He's a frequent presenter at industry conferences; an established blogger; author of featured articles for industry journals and whitepapers on the relationship between Sales and Procurement; and a contributor to the book Next Level Supply Management Excellence: Your Straight to the Bottom Line Roadmap.