Savings double from effective SRM in 2012

Published January 2013

Businesses are increasing their collaboration with suppliers, and boosting the amount they save their organisation as a result.

According to the fourth global supplier relationship management (SRM) survey conducted by consultancy State of Flux, 93 per cent of organisations collaborate with their suppliers, up from 80 per cent in 2011. The research, which included responses from 424 individuals across 350 organisations, also revealed nearly seven in 10 recognised SRM as a formal business discipline, again an increase from figures in the 2011 survey. The report also identified feedback that the proportion reporting savings from SRM in excess of 8 per cent has doubled from 20 per cent in 2011 to 40 per cent in 2012. Further, 87 per cent of responses in this category have invested in SRM training in their business. Mel Shutes, head of SRM at State of Flux and author of the report told SM: "Despite difficult economic times organisations are continuing to invest in SRM which suggests a fundamental belief that it is a better way of working and driving value out of suppliers. Organisations are now seeing suppliers as an asset to their business." The report highlighted Toyota as an example where effective SRM has transformed car production from ‘mass’ to ‘lean’, through sharing long-term goals and working together with a small group of key suppliers. The survey also identified a clear correlation between effective SRM activity and stakeholder engagement, where 63 per cent of those with established SRM programmes had strong support from senior internal stakeholders. The report said the two main barriers to progress SRM are a shortage of people with the right skills and a lack of adequate systems support. A concern reported from the survey was fewer organisations are reporting benefits from supplier innovation, 42 per cent in 2011 to 35 per cent in 2012. The report described this as an “area of untapped opportunity” and encouraged information sharing between businesses and suppliers to get new ideas. Shutes added: "Challenges lie in the availability of people to manage effective SRM and while many organisations aspire to be more innovative with suppliers, the survey showed that businesses are often poor at capturing and implementing this innovation. One respondent to the survey, the supply chain manager of a New Zealand infrastructure group, said: “By working collaboratively with one of our leading electrical component suppliers we have been able to reduce the lead time on a number of projects through production slot reservation and the forward commitment given by the manufacturer. “Through the sharing of innovative ideas we have been at the forefront of new technology implementation which has reduced substantially our operational risk in a number of areas.” However, the report stressed companies still have a long way to go and advised organisations to invest in people and technology to develop an effective SRM strategy. Other recommendations included companies putting in place better contract and performance management with key strategic suppliers through improved communication and new technology. Anna Reynolds, Supply