I interviewed Alan Day who discussed The New landscape for Supplier Collaboration.
Can you provide a brief background of yourself.
Yes. Hi, Dustin.I'm Alan Day. I'm chairman of State of Flux, which is a global procurement organization. I founded the company nearly 14 years ago, and we focus on supplier relationship management, supply collaboration. We've got offices in London, Switzerland, Chicago, Sydney, Melbourne, Auckland, and a development team in Athens.
What's happening in this space regarding supplier collaboration?
We've been conducting research in this space for nine years now, and what we're seeing is, recently, a change in the marketplace where you've got organizations being hit with a rush to digitize. You've got changing of roles. So the CIO no longer has a massive team underneath him. They're becoming kind of super supply managers. Same with people like HR directors or even finance directors where their teams are becoming no longer, and really, they're outsourcing to key suppliers.
You've also got, from a procurement perspective, a difference in value. So in the past, value was around price, whereas now, we've got value equals price, but it also equals risk, litigation, innovation, and access to innovation. It equals faster speed to market. So you've got a whole definition change around values.
So all of these things, as well as a political uncertainty where organizations kind of feel the pressure to collaborate themselves rather than have a government do it for them is putting pressure, I suppose, on creating good, solid supplier relationship management. So we're seeing a huge step change towards people getting it and moving from traditional, thump-the-table type supplier relationships to collaboration, partnering.
And your suppliers are changing. They're no longer a supplier. They're a partner. They're a competitor. They're a customer. So all of that fits to create quite a bit of momentum around supplier management.
Can you talk about how it can be done effectively?
What we've seen, and we've seen through the research, we've got now over a million data points on what makes good SRM. So we've seen that organizations need to do a few building blocks in place. Without good contract management and good performance management, it's hard to get your foundations right. We talk about the six pillars of SRM, the first one being value. So what is that definition of value, and can you articulate it? Can you sell it to both your organization but also to your suppliers?
Second one being stakeholders. Can you get them on board? We know there's a direct correlation between being good at SRM and getting executive level support, specifically chief executive support. So if you can get that support, certainly SRM leaders get far more support than followers.
The third pillar is around processing governance. Everyone tends to rush to that and write a supply management process without doing the first few pillars. So the first thing we look for around processing governance is - have they done segmentation correctly. Have they defined what the treatment strategies are for those segments?And then develop the processes to fit those treatment strategies for each of the segments of suppliers and then creating governance models that fit that.
That leads nicely into the fourth pillar, which is around people and skills. Once you've developed a governance model, you'll look at roles and responsibilities within that governance model — competencies and competency assessment. We, again, know that there's a direct correlation between being good at SRM and training your people, that the SRM leaders send more time and money and resources in developing their people and focusing on those humanistic skills, and we have data behind what skills they tend to focus on.
The fourth one is around technology, so how you industrialize these programs. We know that 79% of key relationships are currently managed on a spreadsheet. I'll repeat that again. An organization's key relationships, nearly 80% of them, are managed on an Excel spreadsheet, which has got to be risky. So to industrialize these things, we're seeing the emergence of supplier relationship technology. And we think that the industry is probably where CRM was about 10 years ago. So we're now starting to see the SRM technology coming through relatively quickly, and that helps industrialize the program.
And then for final pillar is around collaboration. And you could argue this is a bit of output. This is where we want to see things like joint account plans and value release plans coming from those key supplier relationships.
So those are the six pillar in a very quick snapshot. The books that we produced from the research each year are normally organized in those six pillars to help organizations put in place their supplier relationship programs and see what they need to do.
Do you have any examples of success stories?
Yeah, we do. We've had over 1500 organizations participate in the research, and our client base that we work with is about a tenth of those, so about 150 organizations and growing almost daily in terms of organizations we work with to develop their programs. We're seeing a lot of really great organizations in the FMCG space. We've got some really good case studies with people like Mars and Kimberly-Clark, who have done some fantastic work on their SRM programs.
I'm a fan of some of the things that Harley-Davidson have done on their program, especially their supplier board that helps them look at new innovation. So it's almost a formal board position that suppliers apply for. And I think that's really innovative and pretty cool, actually.
But equally, we're seeing people in the UK, like Royal Mail, have a very solid program, and their use of technology is excellent on how it underpins their supplier management program. So there's some great examples, not always from the industries you expect. And interestingly, the car companies, where everyone used to think was good at supplier management, tends to be good in the production side but not so good at the non-production or goods not for resale area. And it is more focused on supplier performance rather than supplier relationships management. So it tends to measure supplier performance to the nth degree but is less collaborative than, say, some of the emerging industries that we see around FMCG or high tech.
But each year we have case studies in our books, and those are also on our website. So you can read about Mars, for example, on our website. There's an interesting one from Allied Irish Bank who are doing some good stuff around innovation. Telstra, the Australian telecoms company, has done some really good stuff around how they're using their suppliers to help their sales team. So there's some great examples, and please check them out on our website.
Thanks. And do you have any final recommendations?
I think firstly, having a great sales pitch on what SRM is. People confuse it, and I made the comment about supplier performance versus supplier relationship management. I've written an article about that one a few years, and it still seems to was a fairly popular one. But actually, being very careful around what is SRM and communicating that to your key stakeholders so that they understand it, I think that's something to watch out for.
The other one is around industrializing the program. I think everyone can point to one or two good relationships that they have with suppliers. But if you stand back and say, what is the supplier experience when they're dealing with us as an organization? Is it consistent? So if they come talk to us in Chicago versus China, will that supplier get a consistent experience?And I think the whole point of industrializing these programs is to drive that consistent supplier experience so that you can reduce risk or harness innovation, and so on. So those are kind of my key tips. I'm happy to talk to anyone on in more detail if that helps.
Where can the audience find more about your research and contact you?
Our website is stateofflux.co.uk. Just as it's spelled, all one word. State of flux.And it's dot co dot UK. They can download the research reports. They can participate. Anyone who does the research gets a free benchmark to show where they are versus the SRM leaders. That's our way of saying thank you for participating in the research. As I said, we've got nine years of data there, which I believe is unparalleled in this field. So there's a lot of insight that we can give them. Please have a look at the website, or they can reach out to me directly by LinkedIn or via our website as well.
Thanks for sharing today, Alan.
Pleasure, Dustin. Thanks for your time.
About Alan Day
Chairman, State of Flux Limited