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SRM in an age of Strategic Account Management How should it work? David Atkinson Founder & MD Four Pillars w: www.fourpillars.co t: +44 (0)121 3731797 m:+44 (0)7946 562927 www.fourpillars.co © Four Pillars 2014
1 David Atkinson Managing Director David Atkinson
VisiDng Lecturer 20 year procurement career in consumer goods, automoDve and aerospace. w: www.fourpillars.co t: +44 (0)121 3731797 m:+44 (0)7946 562927 www.fourpillars.co 2 © Four Pillars 2014
From Buyer at Black & Decker to Procurement Director at Rolls Royce. Clients in pharma, financial services, manufacturing, oil & gas, travel, faciliDes, government, logisDcs. Have you ever felt like.... ....buying companies talk up supplier relaDonship management but efforts aren’t really sustained? ….that SRM ‘programmes’ tend to focus on performance reviews but meeDng schedules run out of steam as parDcipants lose interest? ....suppliers have a jusDfied percepDon that procurement prioriDes are dominated by short-­‐term tacDcal price negoDaDon? ….that suppliers base their strategy on trying to work around and undermine procurement, barely toleraDng your involvement? w: www.fourpillars.co t: +44 (0)121 3731797 m:+44 (0)7946 562927 www.fourpillars.co © Four Pillars 2014
3 Can we manage suppliers effecDvely without understanding the supplier’s interests? What is the supplier wishing to achieve for their business? What is in it for them? To understand this requires an ability to imagine and explore how they see the relaDonship. w: www.fourpillars.co t: +44 (0)121 3731797 m:+44 (0)7946 562927 www.fourpillars.co © Four Pillars 2014
4 Agenda SRM: the what and why The other side: Strategic Account Management Managing suppliers to use SAM to your advantage w: www.fourpillars.co t: +44 (0)121 3731797 m:+44 (0)7946 562927 www.fourpillars.co © Four Pillars 2014
5 SRM -­‐ How we got here: origins and emergence of SRM as a discrete discipline within procurement Supplier RelaDonship Management can be traced back to the supply chain management, network sourcing, and lean approaches. Pioneers in the automoDve sector, focusing iniDally on supply reliability, began to intensify efforts to reduce cost and improve value....beyond the point where the contract had been signed. Supplier Development was born. w: www.fourpillars.co t: +44 (0)121 3731797 m:+44 (0)7946 562927 www.fourpillars.co © Four Pillars 2014
6 Other sectors followed as skilled pracDDoners spread the message Image courtesy of Airbus S.A.S. w: www.fourpillars.co t: +44 (0)121 3731797 m:+44 (0)7946 562927 www.fourpillars.co 7 © Four Pillars 2014
“….compeDDve advantage is increasingly a funcDon of supply chain efficiency and effecDveness…the greater the collaboraDon…the greater the likelihood that an advantage can be gained” (Hines) Now SRM has become an almost mainstream capability for procurement Financial Services, the Public Sector, PharmaceuDcals, Manufacturing, and many others have now established SRM programmes ....there’s now really strong interest in doing SRM but uncertainty about what that means in pracDce.... w: www.fourpillars.co t: +44 (0)121 3731797 m:+44 (0)7946 562927 www.fourpillars.co © Four Pillars 2014
8 So, what is SRM?: here’s a definiDon ....the deliberate pursuit and systema2c management of post-­‐
contract value a9ainable from an organisa2on’s supplier rela2onships. w: www.fourpillars.co t: +44 (0)121 3731797 m:+44 (0)7946 562927 www.fourpillars.co © Four Pillars 2014
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w: www.fourpillars.co t: +44 (0)121 3731797 m:+44 (0)7946 562927 www.fourpillars.co © Four Pillars 2014
10 The downside: inadequate SRM destroys value Silent calls: TalkTalk fined £750,000 by Ofcom Boeing’s Dreamliner baceries “inherently unsafe”—and yours may be too Tesco hit by horse meat scandal Locog missed G4S's
corner-cutting says
insider Critics blast Edinburgh trams
scheme as figures reveal project
cost could top £1bn High Court judge slammed Mid Essex NHS Trust's acempt to deduct more than £84,550 from its caterers Medirest for a one-­‐day old mousse, and £46,320 for out-­‐of-­‐date ketchup sachets as "patently 11 absurd” w: www.fourpillars.co t: +44 (0)121 3731797 m:+44 (0)7946 562927 www.fourpillars.co © Four Pillars 2014
25% of Retailers May Go Bankrupt The upside: addiDonal value from SRM “addi2onal 23% value available from concentra2ng on supplier rela2onships.” (‘Strategic Supplier RelaGonship Management’ – Day, Webb & Hughes, SCM Review (2006) 12 w: www.fourpillars.co t: +44 (0)121 3731797 m:+44 (0)7946 562927 www.fourpillars.co © Four Pillars 2014
“SRM leaders achieved savings of 3 percent on their total annual spend from supplier rela2onship management ac2vi2es, whereas all respondents achieved 1 percent.” (Accenture global SRM survey 2006) “Average financial savings a9ributable to SRM ac2vity (as a % of annual spend with key suppliers)....the most popular answer was in the 2-­‐6% bracket.” (State of Flux SRM report, 2010) HarvesDng value from SRM: how do we make it happen? w: www.fourpillars.co t: +44 (0)121 3731797 m:+44 (0)7946 562927 www.fourpillars.co © Four Pillars 2014
13 Supplier Engagement: the usual starDng point 1 Engagement Value ProtecDon (CM/SPM) 2 Engagement Value Development 3 Engagement Strategic Value CreaDon Performance reviews & dashboards InnovaDon capture Supplier Development Contract & risk management Strategic Alliances Lean process improvement Data sharing via supplier portals Value OpDmised w: www.fourpillars.co t: +44 (0)121 3731797 m:+44 (0)7946 562927 www.fourpillars.co © Four Pillars 2014
14 Engagement is not enough: method and strategy are essenDal SRM Wave Plan Step 4: RelaDonship Strategy Step 3: RelaDonship Analysis Step 2: Cross-­‐funcDonal SRM Team Step 1: Stakeholder Engagement Supply Base SegmentaDon Senior ExecuDve Sponsorship Supplier Engagement Technology: Process, Tools & Templates KPIs, Targets & Benefits Tracking w: www.fourpillars.co t: +44 (0)121 3731797 m:+44 (0)7946 562927 www.fourpillars.co © Four Pillars 2014
15 A word of warning: some common mistakes…. SRM seen as a ‘Procurement IniDaDve’ and not as a cross-­‐
funcDonal acDvity Too much focus on relaDonship quality rather than tangible value Inadequate or no process leading to menu-­‐driven acDvity Lost momentum due to lack of senior support False assumpDons about the relaDonship leading to buyer-­‐supplier misalignment w: www.fourpillars.co t: +44 (0)121 3731797 m:+44 (0)7946 562927 www.fourpillars.co © Four Pillars 2014
16 Strategic Account Management (SAM) w: www.fourpillars.co t: +44 (0)121 3731797 m:+44 (0)7946 562927 www.fourpillars.co © Four Pillars 2014
How do suppliers a9empt their own version of rela2onship management? Strategic Account Management A management approach aimed at building customer loyalty by offering tailored product / service packages on an con2nual basis…. ….to customers iden2fied as being of strategic importance to the selling company…. ….it’s why supplier account managers always seem to talk about ‘relaDonships’ and ‘partnering’. w: www.fourpillars.co t: +44 (0)121 3731797 m:+44 (0)7946 562927 www.fourpillars.co © Four Pillars 2014
18 QuesDons for procurement 1. 
How does the supplier organise its sales & business development acDvity to face our organisaDon? 2. 
What is the aqtude and approach account managers have towards procurement? 3. 
For use, what represents a high-­‐
performing strategic account manager? w: www.fourpillars.co t: +44 (0)121 3731797 m:+44 (0)7946 562927 www.fourpillars.co © Four Pillars 2014
19 Strategic Account Management A systemaDc process of opportunity management, strategic planning and excellence in sales execuDon w: www.fourpillars.co t: +44 (0)121 3731797 m:+44 (0)7946 562927 www.fourpillars.co © Four Pillars 2014
20 Account acracDveness SegmentaDon is crucial: for procurement it’s usually Kraljic, for suppliers it’s customer porrolio analysis Grow Defend and build: Supplier is focused on growing the business and will invest. Irritant Non-­‐strategic: Supplier provides the minimum service response. Looks to exit if necessary. Core Deliver and protect: Supplier works hard to deepen the customer relaGonship. Exploitable Lock-­‐in: Supplier does everything to divert profitable customer from switching. Profit impact w: www.fourpillars.co t: +44 (0)121 3731797 m:+44 (0)7946 562927 www.fourpillars.co © Four Pillars 2014
21 How SAMs see Procurement ‘Troubled’ relaDonships with internal stakeholders Obsessed with status: being ‘in charge’ or ‘at the top table’ Nevertheless, Growing in influence Blind to value – “It’s price Unable to secure reducDon or nothing” consistent support for your Procurement iniDaDves ‘AucDon-­‐junkies’, over-­‐reliant on technology w: www.fourpillars.co t: +44 (0)121 3731797 m:+44 (0)7946 562927 www.fourpillars.co © Four Pillars 2014
22 What they assume You are an irritant to be avoided Procurement ‘sits-­‐on’ the informaDon provided by suppliers, just to create Dme pressure Procurement is incapable of appreciaDng the value the supplier provides deliberately complex and designed to standardise ….killing value If they’re successful in geqng access to senior execuDves, your influence will be neutralised 23 w: www.fourpillars.co t: +44 (0)121 3731797 m:+44 (0)7946 562927 www.fourpillars.co © Four Pillars 2014
You are not the decision maker Your RFP processes are Mostly, SAMs see Procurement as a…. Gate Keepers who get in the way of sales targets, w: www.fourpillars.co t: +44 (0)121 3731797 m:+44 (0)7946 562927 www.fourpillars.co 24 © Four Pillars 2014
create uncomfortable management scruDny, and bonus commissions.
How they deal with it By building ‘coach’ relaDonships to gain access to ‘decision-­‐makers’ Get ahead of the RFP by presenDng to decision-­‐makers, who they assume are the only people who understand value Challenge the authority of Procurement at every opportunity Bring in ‘big-­‐gun’ senior execuDves to build relaDonships and usurp Procurement authority. Engage Procurement only when they’ve run out of other opDons Undermine Procurement by submiqng someDmes non-­‐
compliant alternaDve proposals w: www.fourpillars.co t: +44 (0)121 3731797 m:+44 (0)7946 562927 www.fourpillars.co © Four Pillars 2014
25 SAMs ask 4 key quesDons 1. 
Is the relaDonship we have with the client good? 2. 
Can we influence the specificaDon and circumvent Procurement’s preferred tendering process? 3. 
How do we get coaches who we influence in place who are outside of Procurement? 4. 
Can we get to senior decision makers and take Procurement out of the game? w: www.fourpillars.co t: +44 (0)121 3731797 m:+44 (0)7946 562927 www.fourpillars.co © Four Pillars 2014
26 How do we create the condiDons where SRM & SAM can meet in a ‘producDve’ place? w: www.fourpillars.co t: +44 (0)121 3731797 m:+44 (0)7946 562927 www.fourpillars.co © Four Pillars 2014
27 SAMs suffer relaDonship inflaDon: the supplier delusion Suppliers over-­‐es2mate the degree of interdependence based on their myopic view that they have superior insight into the value their organisa2on provides. Supplier percepDon of relaDonship Integrated Interdependent DELUSION CooperaDve REALITY Basic Buyer percepDon of the relaDonship w: www.fourpillars.co t: +44 (0)121 3731797 m:+44 (0)7946 562927 www.fourpillars.co © Four Pillars 2014
28 From McDonald, Rogers & Woodburn (2000) CharacterisDcs of an excellent SAM? •  SAM demonstrates relentless desire to provide best value. •  SAM ensures supplier’s organisaDon is aligned behind a commitment to providing conDnuous value improvement. •  SAM has appropriate decision-­‐making authority. •  SAM operates with unquesDonable integrity and ethics. •  InformaDon sharing is the norm. •  SAM is visibly proacDve in driving performance. w: www.fourpillars.co t: +44 (0)121 3731797 m:+44 (0)7946 562927 www.fourpillars.co © Four Pillars 2014
29 SRM prioriDes for procurement Alignment Persistence Investment w: www.fourpillars.co t: +44 (0)121 3731797 m:+44 (0)7946 562927 www.fourpillars.co © Four Pillars 2014
Establish relaDonship Ensure diligence and realism (internally and constancy of purpose in externally) at the heart securing best value by seqng of SRM and SAM specific SRM goals pracDce Raise the organisaDon’s capability by invesDng in process, tools and skill development 30 In closing.... Supplier SAM approaches, despite some malign intent, can be made to work for Procurement. SRM is no fad – and is criDcal to business and the development of the value-­‐focused procurement profession. SRM and SAM are both proven concepts – mainstream in several important sectors – learn from others. w: www.fourpillars.co t: +44 (0)121 3731797 m:+44 (0)7946 562927 www.fourpillars.co © Four Pillars 2014
31 Thanks for listening. Any further quesDons? [email protected] Office: +44 (0) 121 373 1797 AnyDme: +44 (0) 7946 562927 davidatkinson4pillars FourPillars4PC w: www.fourpillars.co t: +44 (0)121 3731797 m:+44 (0)7946 562927 www.fourpillars.co © Four Pillars 2014
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