It is a sad fact that many organisations fail to realise the critical importance of managing their suppliers well: almost neglecting it (or leaving it as something that the purchasing department does in its spare time), whilst applying significantly more effort to managing their in-house activities. Whereas successful management of this bought-in spend (and therefore of the suppliers who provide the goods, services and works) should be a key activity, particularly so, as many organisations spend significantly more than 50% of their income on buying in goods, services and works.
Supplier management is sometimes known as Supplier Relationship Management or SRM. However, SRM can mean different things to different people and there is a clear need to define its scope. We take SRM to mean “managing the activities performed by the organisation with each of its suppliers, in order to create value for both parties from the relationship between them”. Others take a narrower view, reserving the term SRM for managing collaborative relationships with a few carefully selected suppliers, while others view the term to include activities such as contract lifecycle management, requisitioning, call-offs, catalogue management, invoicing, payment etc.
Our six-step approach to implementing SRM is set out in the diagram. It is built on the firm conviction that supplier management should be strategic to all sections of the organisation and lays considerable emphasis on stakeholder engagement to ensure business alignment, agreement on scope and business involvement in both SRM process design and implementation. It stresses the need to have a clear vision of what SRM can do for your organisation – what value will it create; what benefits will it bring and what problems will it solve? And it works on the premise that not all suppliers are equal – different suppliers need managing differently. Last, but not least, it suggests you have a look at the market out there for SRM systems and tools to help. Remember though, that these are there to support you, not drive you or constrain you – the dog wags its tail; the tail does not wag the dog.