SIG University Certified Supplier Management Professional (CSMP) program graduate Indre Ciuberke breaks down the importance of the Supplier Relationship Management (SRM) Framework and the four quadrants of SRM communication that adjust the ways of working with suppliers.
When you think about the Supplier Relationship Management (SRM) Framework, it’s not just walking and talking with your Organization partners and having a relationship with them. From my perspective, SRM is based on relationships, however, stressing the communication and information sharing process in the particular relationship. Usually, SRM has corporate attributes such as ensuring the governance, agenda tracking and managing risks associated with the services or products that the supplier provides to the organization.
Every team is focused on bringing value to the organization. SRM can contribute to this is to push the streamlined service delivery by becoming a core internal team in the organization's structure for outsourced service management.
Supplier Relationship Management Team Framework
I have tried to describe the basic SRM as an internal core team framework in the picture above. The idea is based on communication and information flows:
SIG University Certified Sourcing Professional (CSP) program graduate Diana Redwine shares her thoughts on the best way to get business stakeholders engaged.
Ugh, here comes procurement, getting in our way again!
In the Tech world, the role of procurement changes with the transition from start-up to a public company. That transition is full of bumps if not addressed with a support mindset.
Somewhere in the timeframe from growth to a public company, experienced procurement talent is engaged to help move spend activities from tactical to strategic. The notion of this is much more grand and idealistic than the reality.
Traditionally, handling contracts, licenses, order forms, etc., have been managed by the person with the need, not necessarily by someone with expertise in contract development and negotiation. With procurement added to their toolkit, the business stakeholders might say, “gosh, it would be nice to hand this off to someone else” or “how do I know this is the best price/terms?”
More likely, they have been advised that a new policy is being implemented that requires procurement involvement. However, in my experience, many stakeholders view procurement as an impediment to progress and do not willingly hand off their contract needs. Hence the need to truly consider this question of just what the stakeholders REALLY need to know about category management.
Diana Redwine, Senior Procurement Manager, Smartsheet Inc.
In early December 2020, Google published its trends for 2020, listing the top searched terms, people, news stories and more. It is no great surprise that "Coronavirus" was the top searched term and news story. Nor that Tom Hanks, Kobe Bryant or Kamala Harris were high on the list. What I found remarkable is that these trends were not reflected in the top searched terms for SIG's website in 2020. In fact, it was business as usual on our website. Sure "COVID" and "resiliency" and "remote work policies" made the list. Website traffic and searches increased in volume, but our visitors were searching for the same topics and downloading some of our best case studies for help.
Here's just a short snapshot of some of the trending searches in 2020:
Most sourcing professionals know what category management is and a critical mass of our members practice category management at varying levels of maturity. This SIG blog summarizes our resources in one location and is one of our most visited pages. Members frequently download our Template for Building a Business Case for Category Management.
Mary Zampino, Vice President – Content, Research & Analytics
Each year, organizations spend over $20 trillion globally on all kinds of services, according to some estimates. Services in the U.S. make up, on average, nearly 60% of organizations’ total non-payroll external spend (and that can be significantly higher in some industry verticals). The effective management of services spend has been a perennial topic of discussion (and limited action) over many years. And technology used to address complex services in an organization is not well understood.
Spend Matters and Sourcing Industry Group have partnered to field a survey of procurement professionals (CPOs, procurement directors, category managers, etc.) that is described briefly below.
The purpose of the survey is to better understand how and to what extent procurement is using enterprise procurement technology and other solutions to process and manage an organization’s service categories and with what level of satisfaction.
For this survey, the term "services" encompasses a broad range of spend categories, like consulting, facilities management, legal, temporary staffing, marketing and so on.
Despite the size of this mega-spend category, procurement leaders we talk with have agreed that most categories of services are not, to put it kindly, optimally managed and there are few best practices.
There also seems to be agreement that purpose-built technology for specifically managing different services categories, strategically and tactically, is lacking.
Andrew Karpie, Research Director for Services and Labor Procurement, Spend Matters
SIG University Certified Sourcing Professional (CSP) program graduate Karina Swanson discusses the RFx process and how it allows you to analyze real-time market dynamics to ensure you are receiving the right service or product.
There are several reasons you may be considering an RFx strategy as the correct process to pilot for your business. If so, I highly recommend taking a closer look at your portfolio and ask yourself these questions:
- Have you seen a pricing change in the last 12 months?
- Do you have a diverse number of suppliers?
- Do you see small gaps in pricing from dual or multi-sourced products or services?
- Is your portfolio consolidated?
- Have you eliminated all risk factors from your portfolio?
If you answered “no” to any of those questions, then launching an RFx will bring value to your business.
RFx is a term used to describe multiple types of requests. Choosing the right requests for your business is dependent on your end goal. Start by having discussions with your team and stakeholders to identify what you aim to accomplish.
If you are looking for a general understanding of services or products, you can launch a Request for Information (RFI). Most people use this as the first step in their RFx strategy to evaluate their suppliers’ capabilities. An RFI is a useful tool to involve new suppliers on a new project, assess the market for better suppliers, create a short list of suppliers for your portfolio or the next phase of your strategy.
A Request for Proposal (RFP) is sent to specific suppliers (possibly your short list) requesting a solution for specific problems and gives suppliers the opportunity to bid on your services or products. This request also allows you to evaluate the supplier’s skills.
SIG University Certified Sourcing Professional (CSP) program graduate Silver Chaudry discusses how category management takes sourcing initiatives out of silos to create shared objectives and continuous processes across business units that drive efficiency.
Category management is a strategic and collaborative approach to procurement involving the segmentation of related goods and services to proactively manage and consolidate spend, track savings and identify areas of improvement. Category management was first developed in the 1980s, evolving from strategic sourcing but differing as it is an end to end process where the analysis is continuously refreshed to keep up with changing market trends. (Strategic sourcing was typically reactive in nature, conducted for immediate requirements and taking place as a one-time event.) Category management also places emphasis on supplier development, where category managers work closely with suppliers to foster innovation and achieve superior outcomes.
SIG University Certified Sourcing Professional (CSP) program graduate Diane Bradley discusses how CSP modules on vendor relations and category management improved her vendor management and negotiation skills.
I would like to start my essay by saying "thank you." BNY Mellon has invested in its employees and is providing us with this training. I feel that is something that should be recognized, and I do appreciate the opportunity to expand my knowledge, which will ultimately increase my value with the bank. With that said, the SIG University training has provided me with a lot of valuable information and has also given me guidance, which I have started applying in my day-to-day activities.
I feel the units focusing on vendor relations have been extremely helpful. As I continue to negotiate more and more contracts, I have reminded myself to go into the call with my goals established and I have them written down in bullet points, so they are easy to refer to while on calls. I have also made sure to have internal calls with the stakeholders prior to reaching out to the vendor. So when the call is conducted, I am confident that we are on the same page and present a consistent and concise dialogue. I feel this preparation has given me confidence, and I strongly feel that it is represented in the call. I am also very focused on the partnership that we are building with our vendors. I realize I am an essential aspect of the partnership. My dealings with the vendor will make a significant impact on the success or failure of the relationship.
SIG University Certified Sourcing Professional (CSP)program student Kimberly Morelli works at Driven Brands. She shares how essential components such as soft skills and change management can be and how she is implementing newly polished tools and best practices to tackle organizational challenges.
In the CSP program, students focus on the hard and soft skills of sourcing, including strategic sourcing and outsourcing methodologies, as well as best practices in negotiations.
My enrollment in the CSP Program from SIG University has proven to be timely and I am excited at the opportunity to have lessons that can be readily applied to our procurement organization. I also was heartened to find emphasis by SIG on positive supplier relationships versus an adversarial stance as used to be popular. The procurement team I am on has been in a state of transformation over the past few years, shifting from transactional buying to category management with a specific focus on increasing our sourcing processes. I found the CSP program to have laid a strong framework that is applicable to my organization, both in procurement and business areas.
The term “tail spend” has become a common term in procurement-speak because in our minds we like to visualize all of our spend fitting on a nice curve with suppliers on the X-axis and spend per supplier on the Y-axis, something like in Figure 1 below. The suppliers with the lowest spend are plotted to the right and we think of that as the tail. A shorter tail implies we’ve done a better job of consolidating our spend among fewer suppliers. Since supplier consolidation with the goal of cost savings was the raison d’etre of early sourcing groups, the shape of this curve feels like an indicator of success.
Amy Fong, Vice President - Sourcing and Vendor Management, Everest Group
With the evolution of procurement and the shift from a reactive, “three-bid-and-buy” scenario to more advanced means of sourcing, Category Management often is a concept best placed at the latter end of the spectrum. This makes sense because if you still quote products and services on an as-needed basis, you likely haven’t introduced the concept of collectively sourcing all spend within the category or subcategory. That reactionary approach may be the result of several things -- lack of support from the business, a misunderstanding of Procurement’s role, an inadequate process or workflow, or a combination of all of the above.
On the other side, many organizations have Category Management structures in place, or at least claim to. From my experience, an organization saying it has a framework for Category Management and an organization actually having such a framework are two very different things. More often than not, organizations will either employ a homegrown version of the methodology or leverage something that’s really not like Category Management at all.
Category Management can be approached differently based on several factors, including the industry you are in, whether you are service or product focused, what model of procurement you apply (centralized, decentralized, or center led), what drives the most spend in the organization and so on. As a result, I don’t think there is a strict rulebook on how to apply Category Management to your business.
While no two organizations will approach Category Management the same, these best practices should help any organization ensure their unique methodology is effective.
Jennifer Ulrich, Associate Director, Source One, a Corcentric Company