There's much written about a new era of supplier relationships - less transactional, more shared knowledge - do any practitioners have examples of this in policy, or is it just 'hot air'?
In the industry where I work- manufacturing, packaging and the distribution of luxury fragrances, we have been able to implement this type of policy. The production site has selected key strategic suppliers with whom they have decided to create a strong partnership. For example, we work together to share our lean manufacturing tools and coach them on how to reduce their lead times and reduce their minimum order quantities without compromising on safety, quality or cost. It is an investment both sides need to make but pays off in the end. Not only are we able to reduce our inventories, but also build a relationship with the suppliers such that they continuously improve the design and specifications of the materials for us.
I’m aware of the concept, but practically it wouldn’t be possible where I work.
I think for SRM to really work, you need to be quite a modern organisation with the right style of leadership and be in an industry that can benefit from doing so. SRM is such a time consuming activity that you would only be able to do so with the select few suppliers if you could do it. In practice I’m sure the principles and processes followed have existed for a long time (in manufacturing more so) but in a less structured way, which may perhaps be more akin to the overarching purpose of such a programme (trust and mutual gain). For short term projects the concepts of risk and reward being shared I am led to believe are common in NEC-3 style contracting. It would be pretty cool if you did manage it though.
I think the more buyers and suppliers communicate and understand each other, the better. There has been a history of neglecting or squeezing suppliers for unsustainable rates that has produced some dire stats in terms of SME survival. In the UK, there are approx. 1.7 million SME and almost 95% of their finance comes from banks! This is mainly the result of extending payment terms and low rates that affect their cash flow.
An understanding and collaborative approach benefits both sides immensely and does move us into a sustainable new world of B2B dynamics. I see early payments and a truly free access to the market as key points in re-establishing the economic balance.
It depends how you look on SRM and whether your own organization is ready to on-board supplier ideas and involvements. By nature, manufacturing is more prone to work close with suppliers, especially in high tech, where various skills and knowledge is required. It started from simple quality or production problems solving, where suppliers of components, machines and services may be invited and ending with new product development. The last one is liked by many suppliers as allows them to steer specification into direction of their specific capabilities. But going back to the point, yes I have seen SRM to work on various stages of maturity, but I have not seen it to deliver “vast majority” of expected results and improvements. My experience shows, that it is tool used to boost organization performance, both of customer who can get improvements he needs, and suppliers who can protect their margins. The biggest obstacle is in implementation SRM is our own limitation to deal with suppliers ideas even everybody is looking for innovation.
Thanks for your thoughts, Grzegorz. Very apt I think, given how high profile some buyer-supplier relationships are becoming in the UK at the moment, especially in retail. I think there's a growing confidence amongst suppliers to fight any unsustainably priced contracts, but as to whether that's generating better relationships, I'm not sure.