Supply Chain Management: SRM Implementations: Designing business solution for “predictable target performance”

I was reading on supplier relationship management (SRM) technology investments and came across industry numbers on implementation success mentioning of an average 25% of the indirect spend value and 7% of the supplier’s enabled through SRM investments. I smiled within. .. Least surprised. Wondered how the CFO’s / CPO’s would be justifying the benefits against the original business case they sanctioned for the investment.

Best in class implementations have benchmarked up to 98% enablement of procurement processes on SRM platforms.

It is experience that most technology investment business case documents gather dust after the budgetary sanctions are received for the implementation. The initial business case are often directional and at high level with certain best practice and reality assumptions. These do not get translated to the actual application blueprinting and implementation process. The typical implementation approaches of requirement gathering may have a role to play in this.

Here is a small live example. We were on our design boards the other day developing an SRM solution for end to end application implementation program of a global manufacturing organization and landed up with a dilemma if we should design solution for 5% or 90% of value potential of the product. The requirement in the RFP was for implementation of a couple of supplier catalogs only on their SRM platform of choice - which could translate to just probably 5% of the potential value (illustration below).

srm

[Figure- illustrative spend adoption ]

Catalog decisions are a function of content uniqueness, no of suppliers, contract periods, # of revisions, Supplier relations, internal integration, business rules etc. The process routes are a function of the commodity and supplier characteristics. The catalog strategy maps these 2 aspects and assesses all the procurement transaction types leading to mapping each type to the various technology platform options is not often considered. Similar for direct material there are multiple replenishments we could plan for – MRP driven , PO , VMI, Kanban, EOQ, Min Max , Scheduling agreement, Jt continuous replenishment.

Organizations undergoing SRM transformations need to look beyond just the technology platforms, delve their plans deeper into building the enabling transformation components and designing a congenial business environment for successful value realization to predefined business case.

SRM implementations programs need to tie the initial business case to the business solution design to ensure that the right process , right capabilities , right design criteria’s and right measures are targeted to achieve the predefined business case
SRM implementation programs will benefit from incorporating the best of “design lifecycle” process for process design (currently missing in most blueprinting approaches) to encourage process innovations.
SRM implementation programs need to plan for designing business solutions not just for processes but all the business enablers of organization, people, process, technology, data and infrastructure.
Best practices of overall SRM strategy, commodity segmentation, catalog strategy, data classification and synchronization , global process harmonization , requirement prioritization, decision framework, metrics management rapid sourcing, managed services support, change readiness assessments and value traceability should all be a part of the program for accelerated ROI.
SRM implementation programs should be designing the business blueprints for addressing these value drivers of spend management.