Businesses reliant on complex global supply chains in the digital age can no longer adopt the old procurement model of buying at the minimum price in relation to value, drafting contracts and allowing relationships to follow their own momentum unless a problem arises. They must adopt strategic supplier relationship management methods instead, experts claim.
While low-complexity areas, such as the office or janitorial supplies may remain transactional, complex relationships inherently carrying strategic risks, such as cybersecurity, IT, and working with third parties to innovate, need a more rigorous and proactive supplier relationship management approach that tracks the lifecycle of a contract. This is according to Chris McClory, Director of Procurement and Operations Advisory at KPMG, and Marisa Brown, Senior Research Lead at APQC.
A poll last year by APQC found that 80% of organisations with these complex and potentially risky supply chains have implemented, or will within the next two years, a systematic, next-generation supply relationship management strategy. The specific strategy will depend on the needs of each business, but all face a similar challenge with today’s fast-moving, intricate global supply chains – relationships with suppliers are more important than ever.
As McClory put it in an interview with Supply Chain Dive: “It’s almost like a guidance counsellor to serve as a conduit between the supplier and the business to make sure the relationship runs good and each side keeps to their side of the bargain.” Brown said that many businesses find that their suppliers’ success is intimately connected to their own and are eschewing yesterday’s micromanaging methods to allow suppliers to lead with their own expertise to achieve cost reduction and added value.
- Core practices in today’s supplier relationship management (SRM) strategies include:
- Standardising crucial internal activities to a single SRM model
- Collaborating with key players with strong coordination and leadership skills
- Developing a governance plan with stakeholders
McClory adds: “There has to be a weekly, monthly or quarterly cadence where everyone is getting together.”