Given the varying definitions and interpretations of Supplier Relationship Management (SRM) let’s start with ours:
SRM is the business discipline associated with the management of key interactions, performance and related business processes between an organisation’s supplier-facing staff and strategic suppliers and partners. Executed effectively, SRM delivers collaborative benefits for all parties.
Investment in Supplier Relationship Management Systems is increasing significantly, largely due to the recognition that proactive, structured management of supplier relationships has been proven to generate financial value and mitigate enterprise risk.
Providers of SRM technology typically comprise the following profiles:
- Providers offering everything from ERP, P2P, Spend, Sourcing and Contract Management to Supplier Information, Risk and Relationship Management
- Providers focused less on financial management and more on SRM as part of a suite of Spend, Sourcing, Contract and Performance Management offerings
- Providers of ‘niche’, standalone Supplier Relationship Management systems with strong domain expertise and leading edge innovation.
Providers are vying for leadership in the SRM technology space as well as in the ‘emerging’ areas of Supplier Information Management (SIM), Risk, Sustainability, and Social Supply Enterprise Collaboration. All the while the market is moving towards a more holistic approach to encompass each of the above areas.
SIM providers are investing in Risk and SRM while niche SRM providers, as well as mainstream Sourcing/ Contract/ Spend providers, are increasingly investing in SIM and Risk. Social Enterprise Collaboration, meanwhile, is at its early stages of application within a Supplier Management context; however, it represents one of the most notable growth areas as well as an opportunity for improved collaboration and innovation with suppliers.
Deciding on an SRM system: key steps
So what steps should you take when you’re considering a Supplier Relationship Management system?
- Define SRM as it applies to your business, including goals, scope of application and identification of stakeholders
- Ensure that internal stakeholders, across all supplier-facing functions, understand the business case and selection criteria associated with investment in a Supplier Relationship Management system
- Ensure that your business has the necessary governance, skills, processes and resources required to effectively leverage a Supplier Relationship Management system
- Clearly communicate the cross-functional commitment required to successfully introduce/ deploy a system, ideally to include CEO-level sponsorship
- Align your Supplier Relationship Management system selection with a complete Supplier Management strategy, e.g. align to ERP/ financial vendor management, Risk, Spend, Sourcing etc
Deciding on an SRM system: other factors to consider
- Domain expertise and focus – Does the provider exhibit strong domain expertise and commitment to continuing to invest in SRM or a subset of multiple technology solutions they offer?
- Potential to engage with providers at early stages – Mid to large organisations are currently benefiting commercially from helping to shape the development and roadmap of the more innovative providers
- Define the professional/managed services requirements – e.g. training and supplier communications by location/ geography/ business unit. In turn, consider the total cost of introducing the system, including internal or external support pre and post deployment
- Method of introduction/ deployment, e.g. Stand-alone or integrated with one or multiple system/ multilingual requirements
- Interoperability – Consider the ability of providers to either deliver or integrate with complementary Supplier Management technologies, particularly the closely aligned areas of SIM and SRM
- Referencability – As the adoption of SRM technology is at an ‘emerging’ stage, don’t expect multiple references, particularly for some of the latest functionality offered. Watch out for forward-selling – determine what’s available now, request details of the roadmap and proven record of delivering ‘roadmap’ items committed to existing customers
- Finally, given the inherent principles of SRM, the provider should demonstrate strong business relationship management skills.
Published November 2015.