Part One: Do we really understand SRM ( Supplier Relationship Mgmt) ?
1) 62% of Supply Chain operations did not have an accepted definition of Supplier Relationship Management in their organization
2) 50% of the companies having implemented SRM applications do not know how to measure the benefits of these initiatives.
I was equally confused as many others in the supply management function, of the various terminologies that are used interchangeably for the same sourcing and procurement processes e.g. supply management , supplier relationship management , strategic sourcing , spend management , supplier performance management .
I opted for a deep dive and surfaced more confused than ever. Depending on who was talking SRM the definitions also kept changing – product vendors have an application centric view; consultants talk transformation or implementation approach, and buyers look at this as managing categories and transactions.
Till I came across a white paper by Pierre Mitchell and understood the concept in a jiffy.
1. Supplier Relationship Management ( SRM) – Externally Focused ( Help me help you, [ to help " us"])
2. Spend Management – Internally focused operations - Show me my money
3. Supply Management – Customer fulfillment directed
4. Supplier performance management (SPM) - one-sided vendor performance management process or BI implementation focused.
I quickly tried mapping the KPI’s for each of these situations and realized how the same set of processes ( and leading buyers response ) could react differently to the variance in focus with the above 4 situations.
We decided to refine (re-define) our definition of Supplier Relationship Management.
Supplier Relationship Management" is a collaborative win - win business discipline of strategically managing the supplier engagement process to maximize the potential value of those relationships by providing seamless integration capabilities for smooth harmonized operations and aligned business goals with the partner supplier community.
With majority of the value chain of typical manufacturing organizations lying in the extended enterprise area of their supply chain and beyond the typical traditional internal strategic investments within the company’s span of control, we see that a " true" SRM program is a major competitive strategy organizations could strive for to expect major bang for the buck.
Figure: Joint SRM KPI's with suppliers leading to overall organizational performance.
The challenge for organizations is really to guide this external focused collaborative theme to be enabled by the typically internally focused processes and the existing SRM technology applications that may not address this philosophy in totality on its own. Getting to the depth of this business vision and having a detailed solution plan to connect the business objectives ( & related now changed performance measures ) to each of the technology enabled business processes scenarios can make this happen.
Let us try to discuss some solution possibilities in the following SRM series. Meanwhile , look forward to your experiences and thoughts .
1) Purchasing Must Become Supply Management by Pierre Mitchell.
2) Companies Are Confusing Supplier Performance With Supplier Relationships, State of Flux