Summary
Highlights
Craig Johnston introduces the webinar's objectives: to share seven specific and quickly implementable recommendations for successful Supplier Relationship Management (SRM). He defines SRM as a single, organization-wide approach to managing contracts and interactions with suppliers, focusing on understanding how to manage them based on their potential contribution and risk profile. He introduces a model illustrating key SRM enablers like value outcomes, supplier segmentation, and various dimensions of management.
The first tip emphasizes broadening the scope of criteria used for supplier segmentation beyond traditional factors like specifications, ease of change, number of alternative sources, and spend. Craig suggests incorporating elements such as supply chain volatility, stakeholder input requirements, incident impact, brand contribution, and strategic impact to gain a more insightful view of supplier relationships. Capturing insights generated for each criterion is crucial as they will drive future agendas with suppliers.
Craig advises performing segmentation during the business case or category strategy development phase, rather than after contract rollout. This allows organizations to fully understand the scope of work needed for supplier engagements and internal changes required to effectively manage tiered relationships. Doing it later can lead to trying to force practices into established contracts, which can be inefficient.
This tip focuses on defining value outcomes using a three-dimensional approach: Protective Value (securing foundations like strong supply chains, safety, and consistent ways of working), Productive Value (pushing tolerances and expectations for innovation, speed, cost, quality), and Progressive Value (breaking new ground for revenue opportunities, capability building, and community responsibility). This comprehensive definition ensures a clear understanding of what is expected from supply relationships based on their tier.
Craig introduces a 'quirky' but successful tip: evaluating the people proposed by suppliers in tendering exercises, especially for critical, long-term partnerships. In the Watercare example, behavioral and personality tests, case studies, and monitored events were used to assess candidates' influencing, problem-solving, teamwork, analytical, and creative skills. This ensured that the right individuals, beyond just the company's capabilities, were selected to form high-performing teams.
This tip addresses the foundational aspects of contract management: ensuring shared understanding, clear ownership, and practical translation of contractual requirements. 'Shared understanding' means both parties fully grasp all obligations. 'Ownership' clarifies who is responsible for delivering each element. 'Translation' focuses on defining how tasks will be undertaken to ensure consistent and compliant delivery. Craig highlights that a lack of attention to these basics often undermines trust in SRM.
Building on value outcomes, this tip emphasizes translating desired outcomes into clear performance measures. It advocates for both lagging indicators (e.g., periodic audits, carbon benefits tracker, Net Promoter Score) and leading indicators (e.g., SOPs and training, innovation pipeline performance, customer engagement strategies) to manage and predict performance effectively across protective, productive, and progressive value dimensions.
The final tip addresses driving innovation through supplier relationships. It stresses the importance of having a plan or framework to capture, facilitate, screen, and track innovation ideas. The framework should start with clearly defined outcomes, classify relevant ideas, and include processes for collecting, cleansing, evaluating, and executing ideas, ultimately tracking benefits like price, speed, or safety. This structured approach helps ensure innovation efforts are aligned with business needs and deliver measurable value.
Craig discusses applying SRM tips in the context of COVID-19, highlighting how broadening segmentation criteria to include volatility and incident impact helps in understanding supply chain risks. He also addresses concerns about personnel changes in long-term contracts, explaining how behavioral assessments are designed to capture inherent traits and how contractual clauses can manage turnover. He emphasizes that proactive SRM builds trust and makes organizations 'customers of choice' during crises. Furthermore, engaging business stakeholders involves aligning SRM goals with their objectives and presenting benefits in their language, moving beyond traditional procurement roles to act as guardians of value.
Delving deeper into behavioral assessments, Craig clarifies that they can be formal, involving third-party tools, questionnaires, and structured case study exercises. He recounts using such methods to assess supplier teams in the Watercare project, aiming to understand natural styles. Post-contract, 360-degree surveys can assess the health of organizational relationships, focusing on aspects like information sharing, openness, and trust. Regarding software, Craig notes that he's primarily used clever spreadsheets for supplier categorization but has encountered various contract management platforms like Ariba and Coupa. He suggests that while technology is an enabler, the core of SRM remains effective human interaction and collaboration.