THE BUSINESS OF SUPPLIER RELATIONSHIPS
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1 THE BUSINESS OF SUPPLIER RELATIONSHIPS Summary prepared for 29 th September 2015
2 Consulting Training Technology About State of Flux State of Flux was founded in We have grown into a leading procurement and supply chain consultancy providing contract lifecycle management, category management and strategic sourcing, and supplier relationship management services. We work with clients globally, and have our headquarters in London with offices in Switzerland, Greece and Australia. State of Flux has an extensive list of multinational clients to whom we offer significant and sustainable results quickly through our innovative consulting, training and technology solutions. State of Flux prides itself on its action centred approach, and tailors best practice procurement and supply chain solutions to our client needs. Supplier Relationship Management Contract Lifecycle Management Strategic Sourcing and Category Management Contact: Mel Shutes mel.shutes@stateofflux.co.uk +44 (0) State of Flux Ltd
3 About the research 7 years Over 1200 different companies Over 1800 respondents? company responses 752 respondents more than 25 industry sectors 2015 State of Flux Ltd
4 The six pillars of SRM VALUE Business drivers & value Stakeholder engagement & support Governance & process People & skills Information & technology Relationship development & culture Business Stakeholder Governance drivers engagement & People value & ADVANCED process Information & skills & support Relationship & technology development & culture Value beyond Strong lower and Supplier prices active segmentation engagement Role definition Use of and systems Collaboration and technology support from : Value linked Executives to business Differentiated Skills ESTABLISHED objectives treatment and Systems competencies Innovation strategies functionality Business Roles & operations and Capability responsibilities Management assessment Customer of information of choice Value delivered DEVELOPING Suppliers Meeting structures Investment in training UNDEVELOPED 2015 State of Flux Ltd
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6 Current state SRM maturity SRM index ADVANCED ESTABLISHED DEVELOPING UNDEVELOPED Business drivers & value Stakeholder engagement & support Governance & process People & skills Information & technology Relationship development & culture Leaders (average of 22 responses) Fast followers (average of 25 responses) Followers (average of 71 responses) Others (average of 250 responses) 2015 State of Flux Ltd
7 Current state 2015 Switzerland snap shot 2015 SRM maturity - CH 6.0 ADVANCED 4.5 ESTABLISHED 3.0 DEVELOPING 1.5 UNDEVELOPED Business drivers & value Stakeholder engagement & support Governance & process People & skills Information & technology Relationship development & culture Average Swiss (18 responses) Top 5 Swiss Others Swiss 2015 State of Flux Ltd
8 Current state 2015 Which industry is the most mature? FMCG / CPG appear to be the most mature* industry sector Followed by IT / HI TECH and FOOD & BEVERAGES Which region is the most mature? EUROPE and N.AMERICA rank equal for SRM maturity* What is the primary focus of SRM? Managing key supplier relationships to deliver value is the focus for 78% of leaders, fast followers and followers *Derived from the proportion of industry sector and regional company representation in the three benchmark groups 2015 State of Flux Ltd
9 Current state 2015 Progress? 82% of companies report SRM making progress but still significant barriers to overcome The number 1 barrier lack of budget and resources number 2 lack of people and skills number 3 organisational change number 4 measuring benefits number 5 lack of supplier support 29% compared to 8% in 2014 and 13% in State of Flux Ltd
10 BUSINESS DRIVERS & VALUE
11 BUSINESS DRIVERS & VALUE The SRM value proposition / business case Around 90% of leaders, fast followers and followers have either documented the SRM value proposition or are working on it. For others the figure is closer to 70% The leaders benefits 93% risk reduction 73% innovation 87% cost reduction All others - 55% 57% 37% Financial benefits 22% of companies report post contract financial benefits of 4%+ For leaders the proportion is 43% making them almost twice as likely to be achieving the 4% State of Flux Ltd
12 BUSINESS DRIVERS & VALUE Non-financial benefits Customer of choice benefits most often non contractual and at a suppliers discretion More than half of respondents report increased commitment and improved account management. Amongst leaders its 9 in 10 46% - improved service levels 39% - improved quality 28% - improved end customer experience 25% - improved supply continuity 21% - improved access to the best resource 19% - improved speed to market 2015 State of Flux Ltd
13 STAKEHOLDER ENGAGEMENT & SUPPORT
14 STAKEHOLDER ENGAGEMENT & SUPPORT Senior stakeholder support Only 4 in10 leaders have strong and active support from senior stakeholders For fast followers and followers this drops to 3 in 10 and for others 2 in 10 Senior stakeholder support barriers VALUE PROPOSITION - 42% of companies believe senior executives are insufficiently aware of the SRM value proposition. OTHER PRIORITIES - 42% believe they have other priorities PROCUREMENT PROFILE - 28% believe it relates to procurements profile at the executive level State of Flux Ltd
15 STAKEHOLDER ENGAGEMENT & SUPPORT Supplier engagement 90% of leaders have gathered structured supplier feedback in the last 12 months Fast followers and followers are <50% and others it is <30% Progress barrier number 5 lack of supplier support 29% compared to 8% in 2014 and 13% in State of Flux Ltd
16 GOVERNANCE & PROCESS
17 GOVERNANCE & PROCESS Segmentation Over 80% of companies have segmented their suppliers Segmentation criteria Spend 100% Business criticality 79% Segmentation Potential for criteria growth 44% Supplier footprint 41% Supplier innovation 37% How many strategic suppliers? 10 or less 36% 11 to 25 31% % Don t know 5% 2015 State of Flux Ltd
18 GOVERNANCE & PROCESS SRM foundations Only 20% of respondents have robust performance management in place for >75% of their key suppliers Only 22% of respondents have robust risk management in place for > 75% of their key suppliers Segmentation criteria Only 29% of respondents have robust contract management in place for > 75% of their key suppliers 2015 State of Flux Ltd
19 PEOPLE & SKILLS
20 All respondents PEOPLE & SKILLS There is a direct correlation between training and being an SRM leader. But there is clear under investment in the people development process. 100% 57% Segmentation criteria 33% 22% 36%? Define the SRM role Create an SRM competency framework Complete an SRM skills and competency assessment Implement SRM training 2015 State of Flux Ltd
21 PEOPLE & SKILLS Supply and Demand How important are these skills for SRM? Which need most Segmentation improvement? criteria DEMAND How much training is provided? SUPPLY 2015 State of Flux Ltd
22 INFORMATION & TECHNOLOGY
23 INFORMATION & TECHNOLOGY Using IT systems Less than 1 in 10 companies are making significant use of IT systems to support SRM. Amongst leaders its 1 in 3 Of those using IT around half describe its support for SRM as poor IT problems Segmentation criteria FUNCTIONALITY INTEGRATION ACCESS 59% feel current systems functionality is lacking important components 58% are having to gather data from disparate systems and rework manually 38% complain that systems cant be accessed by stakeholders or suppliers 2015 State of Flux Ltd
24 INFORMATION & TECHNOLOGY Current efficiency 79% of companies are creating scorecards and reports etc in Excel Documents stored on a shared drive by 64% of companies While 64% of companies have a contract management system only 42% have IT enabled performance management and 31% risk Segmentation criteria management 2015 State of Flux Ltd
25 RELATIONSHP DEVELOPMENT & CULTURE
26 RELATIONSHIP DEVELOPMENT & CULTURE Collaboration 9 in 10 leaders are regularly collaborating with their suppliers Innovation Innovation is a key business driver for 68% of companies but only Segmentation criteria 10% of companies believe they have an effective process to manage supplier innovation. Amongst leaders this figure is 52% 2015 State of Flux Ltd
27 RELATIONSHIP DEVELOPMENT & CULTURE Mutuality 64% of companies share SRM benefits with suppliers. Amongst leaders it s 95% Just 50% of companies believe they are customer of choice to more than half of their key suppliers. Amongst leaders it s 95% Segmentation criteria Only 34% of companies conduct 360 relationship assessments with their key suppliers 52% believe that SRM is making negotiations more constructive and 46% believe it results in better outcomes for both parties 2015 State of Flux Ltd
28 SUMMARY Steady progress but not spectacular What is the key to a step change? Executive support and a strong value proposition number 1 lack of budget and resources Segmentation criteria number 2 lack of people and skills number 3 organisational change number 4 measuring benefits number 5 lack of supplier support 2015 State of Flux Ltd
29 THANK YOU
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31 Communication Strategic thinking Trust building Influencing Cross-functional working Problem solving Commercial / contract Leadership Facilitation Negotiation Change management Market & category knowledge Project management Understand sales and KAM General product/service Account planning Deep product/service 0 50% 100%
32 CS-12-B 52% 31% 15% 1% 0% 1% Become much more important Become more important Stay the same Become less important Become much less important Don't know
33 CURRENT STATE 2015
34 19% 61% 4% 2% 14%
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37 Business drivers & value
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