What Additional Value Can Be Achieved From Strategic SRM?

In a four part series, Trevor B Cameron, Mgmt., MBA(Distinction) explores a 21st century approach for strategic supplier relationship management (SRM). In part one he examined the archaic definition of SRM and the strategic view of SRM. Part two explores the potential value add in strategic SRM.

Our markets are changing, it’s no longer company versus company.  In a disruptive world where channels to markets are constantly changing, consumer expectations are shifting, and technology is increasing opportunities almost daily, competition is now supply chain versus supply chain.  Your suppliers are a critical part of that supply chain.  Having acknowledged that your suppliers can contribute to increased value and competitiveness, we must identify what that value is – if it is not already contained within the contract. Those value levers can include:

1. Single Supply Chain

Recognising that your company’s customer is also your cupplier’s customer – working together to ensure the best cost, high quality goods or services, are delivered to the customer right first time.

2. Innovation

Collaboration on new and different ways of delivering goods or services, seeking out improvements, new products, new and better ways of delivering customer demand, and implementing those ideas successfully.

3. Cost reductions

Collaborative effort across your supply chain to reduce costs and optimise all activities associated with supply requirements. This means working together with your supplier on manufacturing efficiencies, inventory optimisation, improved planning and reduction of the bullwhip effect, balancing supply and demand across all companies in the supply chain, joint logistics operation, capacity optimisation and a reduction in capital exposure.

4. Performance improvement

While the contract will likely have a service level agreement (‘SLA’) attached, continuous improvement activities to ensure both companies consistently exceed those performance metrics and reduce costs will also ensure that customers remain loyal and committed with the result that they will focus more on quality and service than on price.

5. Seeking Increased Revenue opportunities

Joint research and development (with clear intellectual property (‘IP’) boundaries and new product development. Ensuring that changing customer demand is always met with the right product at the right time, using the right channels and supporting technology.

6. Risk Reduction

Collaborative effort on reduction of risk in inventory, capital, changing market conditions, competitive issues, reduction in disputes and legal costs, and general product and supply risk.

7. Environmental

Environmental issues are becoming an increasing concern for Australian consumers. In the past we have paid glib acknowledgement to these concerns with the righteous approach of ‘We know best on environmental controls.  That is no longer an acceptable approach.  Companies must work together not only to articulate their environmental approach, but to implement these activities within the supply chain and communicate that integrated clean supply chain approach to customers.

8. Technology and Disruption

Changing consumer demand patterns and the emergence of social media have fundamentally changed the way we make and distribute products and services. The increasing need for real time accurate and shared information has accelerated the need for supply chain collaboration and a real focus on delivering the right products and services in new ways and more efficient ways to our customers.

Regretfully, most organisations fail to identify what value is possible from a true SRM relationship as clearly identified in the State of Flux ‘2017 Global SRM Research Report’. Importantly State of Flux also notes that a few companies are set apart from their competitors and it is these companies that are leaders in their respective markets.  We should look to these companies for examples of what might be possible in a best in class strategic SRM approach.