In this issue
12 March 2020:

Supplier Relationship Management and Third-Party Risk Management Model

Introduction

In our interactions with clients we find that organisations have a very one-dimensional approach to Supplier Relationship Management (SRM). We find the value of SRM is focused only on cost reduction and SLA management.

This blog is focused on the implementation approach that was followed in Project Ignite to introduce and embed the principles of SRM.

“Procurement without supplier management is like sales without account management. It does not work.”
(Lars Kuch Pedersen, LeanLinking)

Current State of SRM

  • One dimensional approach addressing one function, such as performance with small sets of suppliers.
  • Heavily focused on transactional stage of vendor life cycle
  • Value of SRM is only tied to cost reduction and SLA management
  • Viewed and executed as set of tactical activities
  • SRM and Vendor Management activities are dispersed through the organization with limited control.

Future State of SRM

  • Suppliers Relationship Management intrinsic to the success of the organization through the use of strategy and advanced vendor management framework.
  • Holistic view of suppliers across the various business functions
  • Advanced skills in data analytics, financial review and risk management
  • ROI measurement in terms of strategic business outcomes.
  • Define strategic vendor management intent, goal and relationship outcome
  • Governance expanded and extended across internal teams and strategic vendors.

Migration

  • Assess current maturity against desired state
  • Implement Strategic Vendor Management Framework
  • Clarify, standardize and streamline Vendor Management Process

Value can be derived through strategic and performance-based collaboration

Without rigorous contract management 75% of sourcing savings can disappear withing 18 months.

SRM Process – Detailed Approach

Cross Functional Team Driving SRM

SRM and Risk Segmentation Model

Initiate Supplier Relationship Management Plan

Supplier Management Reviews

Supplier Management Review Results

Summary

To secure the suppliers commitment to the relationship and continuous high service delivery, reward programs such as Supplier Compliance Certificate or Supplier Recognition can be implemented within the SRM Plan.

There are Several benefits associated with supplier relationship management, and they all culminate in a healthier bottom line as we saw in Project Ignite.

  • Reduced costs
  • Increased efficiency
  • Consolidation of the supply chain
  • Management of supplier performance
  • Continual improvement of operations
  • Improved risk and compliance profile

janineh@tkjprocurement.com | etienneh@tkjprocurement.com | www.tkjprocurement.com