the business of supplier relationships speaker... · supplier relationship management contract...

Summary prepared for 29th September 2015

THE BUSINESS OF SUPPLIER

RELATIONSHIPS

Supplier Relationship Management

Contract Lifecycle Management

Strategic Sourcing and Category Management Co

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State of Flux was founded in 2004. We have grown into a leading procurement and supply chain consultancy providing contract lifecycle management, category management and strategic sourcing, and supplier relationship management services. We work with clients globally, and have our headquarters in London with offices in Switzerland, Greece and Australia. State of Flux has an extensive list of multinational clients to whom we offer significant and sustainable results quickly through our innovative consulting , training and technology solutions. State of Flux prides itself on its action centred approach, and tailors best practice procurement and supply chain solutions to our client needs.

About State of Flux

Contact: Mel Shutes [email protected] +44 (0) 2078 420 600 © 2015 State of Flux Ltd

mailto:[email protected]

About the research

2009

2010

2011

2013

2014

2015

7 years

Over 1200 different companies

Over 1800 respondents ?

2012

367 company responses

752 respondents

more than 25 industry sectors

© 2015 State of Flux Ltd

The six pillars of SRM

Business drivers &

value

Stakeholder engagement & support

Governance & process

People & skills

Information & technology

Relationship development

& culture

VALUE

Value linked to business objectives

Value beyond lower prices

Value delivered

Business drivers & value

Strong and active engagement and support from : • Executives • Business & operations • Suppliers


Supplier segmentation


Differentiated treatment strategies

Roles and responsibilities

Meeting structures

Role definition

People & skills

Skills and competencies

Capability assessment

Investment in training

Use of systems and technology


Systems functionality

Management of information

Collaboration

Relationship development & culture

Innovation

Customer of choice

ADVANCED

ESTABLISHED

DEVELOPING

UNDEVELOPED


Leaders (average of 22 responses)

Fast followers (average of 25 responses)

Followers (average of 71 responses)

Others (average of 250 responses)

Business drivers &

value



People & skills



& culture

ADVANCED

ESTABLISHED

DEVELOPING

UNDEVELOPED

Current state 2015

2015 SRM maturity SRM index

6.0

4.5

3.0

1.5

4.0

3.5

2.9


Top 5 Swiss Average Swiss (18 responses) Others Swiss

Business drivers &

value



People & skills



& culture

ADVANCED

ESTABLISHED

DEVELOPING

UNDEVELOPED

Current state 2015 – Switzerland ‘snap shot’

2015 SRM maturity - CH

ADVANCED

ESTABLISHED

DEVELOPING

UNDEVELOPED

6.0

4.5

3.0

1.5


Current state 2015

Which industry is the most mature?

FMCG / CPG appear to be the most mature* industry sector

Followed by IT / HI TECH and FOOD & BEVERAGES

What is the primary focus of SRM?

Managing key supplier relationships to deliver value is

the focus for 78% of leaders, fast followers and followers

Which region is the most mature?

EUROPE and N.AMERICA rank equal for SRM maturity*

*Derived from the proportion of industry sector and regional company representation in the three benchmark groups


Current state 2015

82% of companies report SRM making progress but still significant

barriers to overcome

Progress?

The number 1 barrier – lack of budget and resources

number 2 – lack of people and skills

number 3 – organisational change

number 4 – measuring benefits

number 5 – lack of supplier support

29% compared to 8% in 2014 and 13% in 2013


BUSINESS DRIVERS & VALUE


The SRM value proposition / business case

Around 90% of leaders, fast followers and followers have either

documented the SRM value proposition or are working on it. For others the figure is closer to 70%

The leaders benefits

87% cost reduction 93% risk reduction 73% innovation

All others - 55% 57% 37%

Financial benefits

22% of companies report post contract financial benefits of 4%+ For leaders the proportion is 43% making them almost twice as likely to

be achieving the 4%+



Customer of choice benefits – most often non contractual and at a suppliers discretion

Non-financial benefits

More than half of respondents report increased commitment and

improved account management. Amongst leaders its 9 in 10

46% - improved service levels

39% - improved quality

28% - improved end customer experience

25% - improved supply continuity

21% - improved access to the best resource

19% - improved speed to market


STAKEHOLDER ENGAGEMENT

& SUPPORT

STAKEHOLDER ENGAGEMENT & SUPPORT

Only 4 in10 leaders have strong and active support from

senior stakeholders

For fast followers and followers this drops to 3 in 10 and for others 2 in 10

Senior stakeholder support

Senior stakeholder support barriers

VALUE PROPOSITION - 42% of companies believe senior executives are

insufficiently aware of the SRM value proposition.

OTHER PRIORITIES - 42% believe they have other priorities

PROCUREMENT PROFILE - 28% believe it relates to procurements

profile at the executive level.


STAKEHOLDER ENGAGEMENT & SUPPORT

Supplier engagement

90% of leaders have gathered structured supplier feedback in the last 12 months

Fast followers and followers are <50% and others it is <30%

Progress barrier number 5 – lack of supplier support

29% compared to 8% in 2014 and 13% in 2013


GOVERNANCE & PROCESS

Segmentation criteria


Over 80% of companies have segmented their suppliers

Segmentation

How many strategic suppliers?

10 or less 36%

11 to 25 31%

25 + 28%

Don’t know 5%


Spend 100% Business criticality 79% Potential for growth 44% Supplier footprint 41% Supplier innovation 37%




SRM foundations

Only 20% of respondents have robust performance

management in place for >75% of their key suppliers

Only 22% of respondents have robust risk management

in place for > 75% of their key suppliers

Only 29% of respondents have robust contract management

in place for > 75% of their key suppliers


PEOPLE & SKILLS

PEOPLE & SKILLS


There is a direct correlation between training and being an SRM leader. A

ll re

spo

nd

ents

100%

57%

33%

22%

36%

Define the SRM role

Create an SRM competency framework

Implement SRM training

Complete an SRM skills and competency assessment

But there is clear under investment in the people development process.

?


PEOPLE & SKILLS


How important are these skills for SRM?

Which need most improvement?

Supply and Demand

DEMAND

How much training is provided?

SUPPLY


INFORMATION &

TECHNOLOGY


INFORMATION & TECHNOLOGY

Less than 1 in 10 companies are making significant use of

IT systems to support SRM. Amongst leaders its 1 in 3

Of those using IT around half describe its support for SRM as poor

Using IT systems

IT problems

59% feel current systems functionality is lacking

important components

58% are having to gather data from disparate

systems and rework manually

38% complain that systems cant be accessed by

stakeholders or suppliers

FUNCTIONALITY

INTEGRATION

ACCESS



INFORMATION & TECHNOLOGY

Current ‘efficiency’

79% of companies are creating scorecards and reports etc in Excel

Documents stored on a shared drive by 64% of companies

While 64% of companies have a contract management system only

42% have IT enabled performance management and 31% risk

management


RELATIONSHP DEVELOPMENT

& CULTURE


RELATIONSHIP DEVELOPMENT & CULTURE

9 in 10 leaders are regularly collaborating with their suppliers

Collaboration

Innovation

Innovation is a key business driver for 68% of companies but only

10% of companies believe they have an effective process to

manage supplier innovation. Amongst leaders this figure is 52%



RELATIONSHIP DEVELOPMENT & CULTURE

Just 50% of companies believe they are customer of choice to

more than half of their key suppliers. Amongst leaders it’s 95%

Mutuality

64% of companies share SRM benefits with suppliers.

Amongst leaders it’s 95%

Only 34% of companies conduct 360° relationship assessments

with their key suppliers

52% believe that SRM is making negotiations more constructive

and 46% believe it results in better outcomes for both parties



SUMMARY

What is the key to a step change?

Steady progress but not spectacular

Executive support and a strong value proposition

number 1 – lack of budget and resources

number 3 – organisational change

number 4 – measuring benefits

number 5 – lack of supplier support

number 2 – lack of people and skills


THANK YOU

Communication Strategic thinking Trust building Influencing Cross-functional working Problem solving Commercial / contract Leadership Facilitation Negotiation Change management Market & category knowledge Project management Understand sales and KAM General product/service Account planning Deep product/service

0 100% 50%

31%

52%

15%

1% 0% 1%

Become much more important

Become more important

Stay the same Become less important

Become much less important

Don't know

CS-12-B

CURRENT STATE 2015

19%

61%

4%

14%

2%

Business drivers &

value