SRM is a core subject in the world of supply chain, but it is a surprisingly Cinderella subject - it goes in and out of fashion, the programs developed often seem to have core components missing, resource allocation is patchy and there’s a constant cry of ‘show me the money’.
Is this a really challenging subject, or are we just bad at getting the fundamentals right in this area?
If you look at historical approaches to SRM, there’s always been a solid foundation available for inspection within the car industry. There, excellent measurement programs and supplier development programs exist, trying to identify and extract the optimum performance, and indeed improved performance, as a core activity. Here, the ability of the supplier to add value in a very real way is so embedded that any other approach makes no sense. Joint working, co-location, joint investment programs, approaches which access innovation and development are all put in place.
It is possible to see industries in which strongly adversarial approaches have always been used, and indeed the whole set up is based not on collaborative working, but on closely monitored dispute resolution. The civil engineering world tends to stand out as having a preference in that direction.
So, with those two as opposite ends of the available spectrum, is there a best approach somewhere between them? Well, this is where the complexity arises. There is unlikely to be a one size fits all approach available here. Some arrangements with suppliers will tend to an approach which seeks to check for contractually expected performance, and looks for defensive outcomes if they are not achieved. This happens, in general, when the perceived value from a more complex approach is not visible. Unfortunately, it also seems to be the starting default position.
Contract Management is used by a number of organisations as a way of ensuring that the contracted for value actually arrives and is experienced. This can be a highly effective approach, focusing on outcomes and subsequent payments as a way of ensuring delivery. When managed at too simplistic a level, it can cause significant frustration, as the approach does rely on the intent of the contract having been translated clearly into the words used.
This all implies that we need to be able to adopt a nuanced approach in this area, optimising our use of a range of tools and techniques which are applied to different suppliers and contracts in different ways.
In turn, this suggests that we need a range of tools and systems available to be able to manage the nuanced approach and we also need individuals in place who can see through the complexity to the best combination of approaches to be used.
So, to get to the right set of outcomes, we need skilled resources who are well trained in a range of tools, techniques and systems to ensure that any particular supplier and contract is delivering the maximum value for the organisation, within the envelope of our overall resource constraints.
That, as a final twist, suggests that we’d better get good at organisational design as well, as we need to be able to optimise the outcomes we are seeking against what we are able to achieve.
It is unsurprising that SRM programs seem to struggle; there is a depth of complexity here which is seldom discussed in any clear way. Bringing this to the fore, and making sure we are concentrating adequately on optimising the value from our supply chains, seems to be an excellent way to progress
One for the new year resolutions, perhaps?
Tagged by topic: Supplier Management
Future Purchasing would like to invite you to receive our
monthly Viewpoint newsletter.
It contains evidence-led best practice procurement insight
guides, leadership and change management articles and
Complete the form below to subscribe today...