Are You Investing Enough Into Your Supplier Relationships?

Next Level Purchasing Association (NLPA), a global organization that helps clients establish procurement best practices and supports the education of procurement professionals, holds its annual conference this September in Pittsburgh, PA. Source One Director, Brad Carlson, will be at the event on an interactive panel to share insights for improving procurement performance.

A key topic of this panel, which happens to be Carlson’s area of expertise, is supplier relationship management. Supplier relationship management programs can help businesses optimize and generate additional value from their supplier base post-contract signature. In June, Source One released its SRM Insights Report, which outlines the business case for implementing such a program.

In truth, many companies spend valuable time and energy finding best-fit suppliers and negotiating cost-effective contracts.  However, that investment is often neglected or mismanaged once the deal is completed. In the SRM Insights Report, it shows three distinct paths that supplier relations can take after the contract has been signed. Suppliers can be essentially ignored (1), even after long and timely negotiations; suppliers can be somewhat managed (2), but not enough to sustain any long-term value; or suppliers can be (3) setup to succeed through SRM. SRM programs support collaboration efforts and put processes in place so that suppliers are engaged and aligned with your business objectives at all times.

 

Figure 1: Supplier Management Value Scenarios

Though there are some SRM skeptics in the world, studies show that without rigorous contract management, 75% of sourcing savings can disappear within 18 months. [1] Some sourcing and procurement departments are resistant, purely due to a lack of understanding of such a program. Carlson hopes that he can illuminate those business professionals and help them realize that SRM can produce continuous improvements in supplier customer service, quality, overall costs, and material flow. The NLPA Conference panel should be an interesting and lively discussion on the topic, but for those not attending you can learn more at srm.sourceoneinc.com.

 

[1] 1 The Corporate Executive Board Company, Create Value Through Productive Supplier Partnerships and Become a “Customer of Choice, http://www.executiveboard.com/exbd/procurement-operations/transformation/supplier-management/index.page (last accessed May 1, 2014)
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