Partnering with suppliers to spark innovation and efficiency
What’s the fix?
A well-defined SRM program will drive a set of activities to capture value.
Implementing a formal SRM program is core to successfully finding a balance among cost, risk, performance and innovation throughout the supply chain.
An effective SRM program can:
- Prioritize resources and activities with suppliers who can provide the greatest value to the business and align with strategic priorities
- Drive continuous improvement within the supply chain around cost, quality, delivery, risk and service levels
- Provide a consistent mode of interaction with suppliers across the company
- Manage relationships with key suppliers to foster long-term involvement and joint value creation
A well-defined SRM program built around four key supplier segments – strategic, preferred, collaborative and transactional – will drive a set of activities to capture value.
To achieve the most value, procurement should focus on five key areas that encompass the supplier life cycle, from qualification to phaseout:
1. Integration. Develop a process to integrate suppliers into the supply base. This may include storing signed agreements electronically, providing applicable training and a review of expectations, and any required testing to enable the supplier to work with the utility’s systems.
2. Collaboration. Consider creating collaborative events, such as annual conferences, executive meetings and roundtables, focused on innovation and based on supplier segment. Collaborative efforts could also include working with suppliers to develop business processes, such as forecasting, planning and new product development.
3. Capability development. Work closely with suppliers throughout the supplier life cycle to understand their capabilities, identify any needs and close the gaps. Host joint business planning sessions throughout the year, as well as conferences and workshops that focus on specific topics.
4. Performance management. Develop a shared supplier scorecard that establishes performance metrics and evaluation criteria. Effectively communicate these metrics and expectations to suppliers.
5. Risk management. Any SRM program requires a robust risk management process. This may include early warning processes to track key indicators for negative trends, collecting input from key stakeholders who interact with the suppliers and creating a risk scorecard.
In addition to these five elements, an SRM program should have strong executive sponsorship, be comprehensive and value-focused, and grow and mature over time.
Part of this maturity will include the use of technology to drive efficiencies and compliance. However, complex technology solutions are not necessary to initiate an SRM program.