Strategic SRM has the power to deliver spectacular benefits; only if used correctly

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By: Sakthi Prasad --

20 August, 2014

Strategic SRM has the power to deliver spectacular benefits; only if used correctly
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When should companies adopt Strategic Supplier Relationship Management (SSRM)? This is a critical question that most of the times do not get asked and hence the effort to implement Strategic SRM fails to yield results.

The numbers say it all - only 40 percent of Fortune 500 companies, who have implemented Strategic SRM actually derived value out of it. This is not because the concept of SSRM is flawed; rather it is because companies end up using it when they are not supposed to. It is like blaming the field of medicine because of wrong diagnosis.

SSRM has the power to deliver spectacular benefits. It improves a company's competitive advantage while helping procurement teams to shift its focus from cutting costs to creating value.

Water-footprint-consumed-across-supply-chainHowever, procurement teams need to be aware of when to take the SSRM route.

First and foremost companies need to identify how mature their procurement function is. For example, in stage 1 of   procurement maturity, a company may look for only better prices from their suppliers and worry about nothing else. Once the price appetite is satiated, the procurement function would naturally move towards better managing their cost base, also known as stage 2, and move further towards collaborating with suppliers to drive their performance, which could be termed as stage 3. Then comes stage 4 - perhaps the most critical of all procurement stages, where companies look to strategically partner with suppliers.

The point to be noted here is that the term "maturity" doesn't necessarily signify the "desired" state. A company can very well achieve its procurement objectives either by negotiating the desired price from its suppliers or by better managing its cost base. Not all companies need to necessarily move across the stages and it is practically impossible too. Also not all companies need to opt for SSRM.

Nevertheless, there comes a time when certain companies can't help but move across procurement stages due to external factors such as competitive pressures or technology changes, and find themselves at a juncture when it would innately be beneficial to implement SSRM. But how would they know that the time is indeed ripe to start treating a supplier or a group of suppliers as strategic partners?

During their webinar, Beroe analysts Ipsita Suman and Harish S  answered the above question and addressed the conundrum called SSRM. During their webinar, Ipista and Harish talked about various stages of procurement maturity, and offer detailed analysis to show when and how to gainfully treat a supplier or group of suppliers as strategic partners.

Key Take Away:

1) When, how and who should implement SSRM?

2) How to identify strategic partners?

3) Best practices to better manage strategic suppliers and ensure higher ROI
 




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