About the Author:
Moses has over 17 years experience managing strategic supplier relationships in large corporates and SMEs. With portfolios in excess of £200M he shares below his approach to enabling the strategic element in key supplier relationships.
Following my last article on Supplier Relationship Management and the value of it, I had a few follow-up questions as to how do you best leverage relationships with key suppliers.
Thank you to all who messaged me and raised the points and for prompting me to write this article.
Let’s start with a simple definition of Strategic SRM to enable us to better understand the topic:
Strategic Supplier Relationship Management views a vendor relationship holistically, allows organisations not only to improve the terms of these relationships, but also to radically re-imagine them by developing new partnership models.PWC
Interestingly, while the definition above is simple, the majority of organisations find it challenging to achieve that level of relationship with their key suppliers. As such businesses are missing out on value creation, innovation, growth etc. Below, I am looking to offer a simple approach to elevating such relationships from the transactional level to the strategic.
Our starting point has to be that the core elements of SRM are in place and working appropriately (segmentation, contract management, regular reporting, escalation management, regular service and contract reviews etc.).
Having identified the key Strategic Suppliers for your business the next step is to put in place a framework that will help you move from the strategic alignment (theory) to the actual implementation (practice).
Obtain buy-in and long-term commitment from your leaders and decision makers.
Define what you want to achieve from this relationship and what you need to realise those goals.
Engage the Strategic Supplier at the right level and align on short- and long-term goals. Ensure there is cross-functional engagement from your business with the supplier and set mutual targets.
Jointly develop plans to achieve these targets/objectives/goals. Focus these on growth, innovation, productivity, quality and margins.
Track value creation throughout the lifecycle of the relationship. It is hugely important that your tracking takes input from the core supplier management metrics so that the holistic view is captured at the strategic level.
Have formal governance structures in place to track progress, value and issues. As this is a strategic relationship the tracking must capture the perspective of both sides. Use 2-way scorecards, implement a Supplier Advisory Board and open up the conversations.
Strategic SRM remains the pinnacle of a supplier relationship. It is not easy to implement or achieve. Business priorities change and so do people, but the above 6 step process will enable you to have the best chance for a successful start. Next week I will be laying out the benefits of Strategic SRM and I look forward to your input.