There has been a plethora of prose, examples, case studies and debates written over the recent decades and by a myriad of authors regarding Supplier Relationship Management (SRM), its pros and cons from both supplier and buyer standpoint and how a mature and well managed SRM program can reap huge benefits for both parties.
In a mature program a well bedded in and honed set of measurement KPIs (for both sides) shall have already been agreed, in place, both parties working together and contributing towards continuous improvements and everyone living happily ever after.
Fair enough. That’s what should be happening in any pre agreed program. Question or issue now is, who makes the call regarding what to measure? How is a program agreed, what has to become included, from what basis does the program kick off and what is the ultimate goal (utopia)?
What sequence of events needs to be identified and how it can be done?
If a program is to succeed there fundamentally requires be a set of identified criteria pre agreed by and with both parties’ senior management, documented, then forming the basis of the program. There is no point in procurement setting expectations and goals in isolation when these may not ultimately be what the buyer’s senior management may be expecting from the suppliers and further, the suppliers may not ultimately be willing to sign up for certain performance indicators where they become disadvantaged as in actual fact the buyer needs to internally fix issues that could unfairly impact suppliers’ capability to perform to expectation. In the case where the supplier may be strategic or key, the outcome for the buyer might not be what the pleasant expectation from what an SRM program was intended to provide.
I would suggest that a stepped sequence of foundation tasks require to be undertaken prior to agreeing a basis point to kick off a tailored program per supplier. It must be stated that there should be no standard program imposed as no two suppliers should have identical target key performance indicators (KPIs) due to a variety of reasons. By all means have a template but in terms of similarity that’s as far as it should go!
What do we want from our key suppliers?
Buyer’s senior management could complete a Management Questionnaire for a list of criteria that they feel is fundamental to the company. To make this as simple as possible the list could contain a prepared range of questions then management individually score these on a (e.g.) 1-5 weighting on an ascending basis from (e.g.) little importance to fundamental requirement. Once all responses have been received an overall weighting average is calculated then forms the criteria and weighted importance of KPIs to be agreed with the suppliers.
The advantage of this method is it could eliminate or minimise “scatter gun” type answers; management assessing the same questions.
How would we select the suppliers for SRM program development?
To ascertain what suppliers should be considered as strategic, or key and to be selected for an SRM program the Kraljic Matrix can be used accordingly. I would suggest that they would (initially) reside within the High Risk-High Spend thus most crucial to the continuing wellbeing of the buyer.
Advantage here is that it sorts out where each supplier can be positioned and identifying those that are key or strategic and in turn forming the selected ones for SRM program development.
How are we perceived by our key suppliers?
It is also very important that the selected suppliers must also get to assess the buyer. This also can be done by way of a Supplier Questionnaire that (same as with Management Questionnaire and format for scoring) contains a prepared list of questions that each supplier shall score on a weighted basis. The result from each supplier could establish a foundation for its own particular program and would be a key measure of buyer performance. An overall weighted calculation for each question could identify how the buyer would stack up against each individual score. This shall assist with the buyer measuring itself in terms of own status within an SRM Maturity Model context.
Additionally the suppliers could comment on rationale for a particular score should they wish that could assist with structure of the particular SRM program.
Once again the advantage for doing it this way would be to avoid scatter gun type responses from the suppliers as they would be scoring the same questions.
Where are we positioned as regards having a mature function?
The responses from the suppliers and weighted scores together with any comments received can be compared with the criteria set out in a Supplier Relationship Maturity Model then an assessment made on how mature the buyer’s overall status is within the matrix and, when compared to best theoretical practice, what would need to be done to reach there that again in turn should influence the extent of how the individual SRM programs would require to be structured and especially what the buyer would require to do to influence a higher ranking, and so on.
Good to go?
Getting there.
It’s important that an SRM program does have a foundation based on acquired data and not ethereal that has been plucked out of the air.
I’ll cover what could be a typical range of questions in future blogs.
