In many companies, SRM (Supplier Relationship Management) is limited to documentation about each supplier. Covering things like key contact information, contract terms, billing & payment, business units served, and the escalation process.
When the SRM process is limited to documentation, your business is exposed to risks.
These risks create barriers to a successful supplier relationship management process. To achieve success, the SRM process must include supplier performance data that solves these 3 barriers:
SRM Barrier #1 – Generic supplier performance data
Quality, delivery, price, innovation are generic measures. Disagree? Ok, let’s assume a scale of 1-10, where 10 is excellent. If quality drops from a 10 to a 6, what does that mean? What’s the effect? How pervasive is the change? Going forward, what should be done differently?
Generic data is not actionable. These types of metrics tend to be sourced from computers. But a computer can’t tell us about the effects of inconsistent supplier performance. But stakeholders can. That’s where the real, actionable data lies. But don’t ask your stakeholders to rate things like quality. Why not? Because it’s a waste of your stakeholders’ time. You’re assuming they have an issue with quality.
To move from generic to actionable supplier performance data, you must quantitatively assess how each stakeholder feels about the suppliers they rely on. And then, qualitatively pinpoint why. But be careful. To identify what’s really going on, your assessments have to allow each stakeholder to define their measures of excellence.
SRM Barrier #2 – Low representation data
Large scope supplier engagements, +$1 million in annual spend, affect the work of many stakeholders. Consider the many interactions that occur when working with these suppliers. The supplier has to engage stakeholders in legal, accounts receivables, purchasing, IT, and the ultimate end user stakeholders. While some stakeholders engage with the supplier more than others, they all have to engage. But it’s rare for supplier performance data to represent this cross-section of stakeholders.
The ultimate end user stakeholders can be pleased as pie. Meanwhile, IT struggles to achieve security compliance and accounts receivables is repeatedly disrupted by the supplier’s outdated billing process. Over time, performance gaps undermine the net value of the supplier relationship. But unless the assessment of suppliers is comprehensive, inefficiencies will continue to drain precious buy-side stakeholder resources.
To move from low to high representative data, you must identify all of the suppliers that each stakeholder works with. And then use this information to establish a feedback cadence based on each stakeholder’s frequency of engagement.
SRM Barrier #3 – Point in time data
“We do an annual survey on our suppliers.”
How do organizations spend billions on suppliers, and only assess whether or not the expected supplier value was attained annually? Why do stakeholders engage suppliers on a daily/weekly basis, and only be asked for feedback on those suppliers annually?
It’s simple. Purchasing lacks the resources to do anything more. SRM is often led by an individual. If there is an SRM team, there are no more than 5 employees. Here’s a quote from a global SRM director on the problem… “I manage over 2,000 supplier relationships. We only survey our top 5. We need to cover our top 250, but I just don’t have the resources.” His team serves over 20,000 stakeholders. And he’s relying on Excel spreadsheets to measure and monitor supplier performance.
To move from a point in time data to “in the moment” data, you must automate the supplier feedback process. The key is to use a software solution that has near zero admin requirements. With minimal admin, the supplier feedback component of the process will never wane due to competing priorities.
To recap, you want to make sure:
- Each stakeholder can define their measures of excellence.
- You identify all of the suppliers that each stakeholder is engaged by.
- You establish a cadence of feedback, based on each stakeholder’s frequency of engagement.
- To automate the supplier feedback process.
- Use a software solution that has near zero admin requirements.
By taking these steps, your organization will avoid the 3 barriers to a successful supplier relationship management process.