Supplier Relationship Management
W H I T E P A P E R – by Steve North, Principal Procurement Consultant, Xoomworks
Supplier Relationship
Management
How to make it work.
The pressure for companies to create economic value and deliver greater returns has resulted in a significant focus on the performance of procurement across the organisation. As a result, more and more companies are looking to create value through the concept of supplier relationship management, but many are struggling to get the publicised benefits. This paper explains the key principles that need to be adopted to ensure success.
SUPPLIER RELATIONSHIP MANAGEM ENT – HOW TO MAKE I T WORK
2
Introduction
Over the past 5 years the pressure for companies to create economic value and deliver greater returns has resulted in a significant focus on the performance of procurement across the organisation. The volatile nature of recent years means that Procurement has had to take a much broader approach to developing supplier relationships and realising benefits.
For some organisations, many of the typical sources of savings and value for procurement organisations have been exhausted. For others, there is a realisation that cost reduction initiatives are not necessarily all good news - driving down supplier margins can often impact quality in the longer term. Additionally, many organisations have key parts of their business consolidated or outsourced - the result being that many of the year-on-year savings are becoming much harder to achieve.
The past few years have seen the procurement function thrust into a more strategic position with a remit to deliver ‘value’ in addition to significant cost savings on the cost of the goods and services they procure. Supplier Relationship Management (SRM) is one of the ways companies are trying to achieve this.
SRM already drives 45% of total procurement value for Top Performers.
Aberdeen, 2012
SRM is different to what many in Procurement are used to. As a
Supplier Relationship
Management
How to make it work.
The pressure for companies to create economic value and deliver greater returns has resulted in a significant focus on the performance of procurement across the organisation. As a result, more and more companies are looking to create value through the concept of supplier relationship management, but many are struggling to get the publicised benefits. This paper explains the key principles that need to be adopted to ensure success.
SUPPLIER RELATIONSHIP MANAGEM ENT – HOW TO MAKE I T WORK
2
Introduction
Over the past 5 years the pressure for companies to create economic value and deliver greater returns has resulted in a significant focus on the performance of procurement across the organisation. The volatile nature of recent years means that Procurement has had to take a much broader approach to developing supplier relationships and realising benefits.
For some organisations, many of the typical sources of savings and value for procurement organisations have been exhausted. For others, there is a realisation that cost reduction initiatives are not necessarily all good news - driving down supplier margins can often impact quality in the longer term. Additionally, many organisations have key parts of their business consolidated or outsourced - the result being that many of the year-on-year savings are becoming much harder to achieve.
The past few years have seen the procurement function thrust into a more strategic position with a remit to deliver ‘value’ in addition to significant cost savings on the cost of the goods and services they procure. Supplier Relationship Management (SRM) is one of the ways companies are trying to achieve this.
SRM already drives 45% of total procurement value for Top Performers.
Aberdeen, 2012
SRM is different to what many in Procurement are used to. As a