1. "Effective supplier management can provide step change
impact to a business"
Jeremy Smith

2. Definition & Scope
Definition:
• The discipline of working collaboratively with the suppliers that are vital to
the success of the organisation, to build trust and maximise value.
Objectives:
Competitive
advantage in
Lower costs / Improved Enhanced
areas such as
increased Reduced risk quality/ supply chain
speed to
revenue service levels efficiency
market and
innovation
Scope:
We are only discussing SRM in todays debate Supplier Supplier
Relation- Perform-
ship ance
Manage- Manage-
ment ment
Contract
Manage-
ment

3. How SRM provides step change to an organisation
• Most organisations have significant external spend which requires management.
Relying on contract and performance management alone will only retain the status-
quo
• Step change in business performance requires Supplier Relationship Management
SRM Sustains and enhances sourcing
benefits
Enables leverage of scale and
volume
Moves beyond traditional
procurement
Mitigates post contractual
opportunism
Mitigates impactful events / risks
3

4. Sustains and enhances sourcing benefits
If supplier engagement stops at the point of contract signature then benefits to the
buyer are likely to be restricted to the contractual requirement, but SRM assisted
delivery is more than the sum of its parts High
Value Delivered* Low
SRM (including SPM & CM)
Contract Management (incl. SPM)
Delivery of contracted Collaboration on identification of
1 1
requirements only mutually beneficial new value
Reduction in supply risk through
2 Relies on static KPIs, if any 2
combined ownership
Often, no incentivisation for Improved supply chain efficiency
3 3
added value – process optimisation
Consequences for poor
Improved supply quality – TQM /
4 performance not applied / 4
Lean
available
Risks allocated to specific party
Innovation / collaboration on new
5 and not mutually managed – 5
product development
blame culture
* Not to scale

5. Enables leverage of scale and volume
Traditional contract management, however well implemented, only focuses on
that specific contract.
It is not uncommon in complex organisations to have multiple contracts with the
same supplier
• Prevent business unit silo
mentality
SRM
• Stop competing against each
other
• Cross category or contract focus
Contract Management
• Coordinated approach to
communications
Buying Org
• Promote organisation alignment
• Restricts ability of supplier to
‘Divide & Conquer’
• Leverage cross supplier P&L
Contract instance spend
• Provides single point of
accountability for both parties
5

6. Moves beyond traditional procurement
Traditional procurement is often short term and involves an up front battle over
commercial terms following by contract management to ensure it is delivered. Some
industries have identified this is not the best approach and that collaboration can
provide competitive advantage
2012 winner of Best SRM at CIPS SM Groningen Gas Field
Awards
• Formation of 5 supplier consortium based on
• Tarmac and Brammer held joint workshops long term contract selected from design
to explain the benefits and deliverables competition
• First stage demand / compliance quick wins • Technical solution had no existing
implemented technological solution
• Full service support and improvements
delivered against clearly defined guidelines • Each company in the consortium brings own
specialist skills
• The benefits were numerous. • Direct interaction between buyer and
- Total cost saving of (28%) supplier to drive innovation
- Supply base rationalised reducing risk
potential and internal management time • The benefits were numerous.
- Transactions were reduced by 80 per - Year on year incentivised cost
cent reduction
- Management information accurate - Uptime above industry average
and relevant
- New product solution developed for
further use on other projects
Solves short term technical problem whilst
Sourcing approach not possible without
developing innovative solutions for further
SRM
application
6

7. Mitigates post contractual opportunism
Suppliers are in business to maximise return on investment as well as the buyers
having the same objective. With traditional procurement this is a zero sum game,
SRM helps to increase the potential returns available
Buyer
Objective
Objective
Buyer
Supplier Supplier
Without SRM – commercial tensions With SRM – shared objectives removes
remain commercial tension
• Traditional procurement approaches are often adversarial
- Work against each other to achieve their own outcomes
• SRM supports both parties to be working to shared objectives and mutual benefit
- Incentivisation retains commercial focus throughout the life of the contract
• SRM enables greater post contractual control of suppliers
- Beyond what was envisaged at the point in time of the contract
- Power circumstance change over time – e.g. BP Gulf of Mexico
- Good relationships allow organisations to adjust to the new circumstances
7

8. Mitigates impactful events / risks
The Japanese earthquake was devastating not only the people living in Japan but its
knock-on impacts on Western supply chains. This was a wake up call for risk
management but also for the implementation of supplier relationship management
8

9. Summary
SRM enables a step change in business performance by removing commercial
tensions and building long term aligned relationship
Benefit Examples
• On-going cost and performance improvement, reduced
Sustains and enhances
risk, process optimisation, quality improvements and
sourcing benefits
new product development
Enables leverage of • Aggregate internal volumes
scale and volume • Aggregate within supplier
• Long term commitments
Moves beyond
• Mutually beneficial sourcing and commercial models
traditional procurement
• Shell / Tarmac & Brammer
Mitigates post • Build relationships to prevent opportunism after change
contractual opportunism • BP Gulf of Mexico
• Japanese earthquake – Airbus
Mitigates impactful
• Boeing Dreamliner
events / risks
• Horsemeat – Marks & Spencer vs. Tesco
9

10. "Effective supplier management can provide step change
impact to a business"
Vote Yes!!