10-point Action Agenda for Strategic Supplier Relationship Management

By Marc Day, Greg Magnan, Mark Webb and Jon Hughes -- Supply Chain Management Review, 4/21/2008

To help managers move forward on strategic supplier relationship management, we have integrated the lessons learned from the survey into a 10-point agenda for action. It outlines the key steps for organizations looking to build their capability in this area and demonstrates that significant changes in the operating model change are required to unlock the potential value:

1. Current situation.
   Baselining existing levels of involvement, practices, and value delivered from supplier management provides a platform for subsequent improvement activities and a vehicle for tracking progress.
2. Business case and ROI.
   Quantifying the benefits expected from radically changing ways of working with strategic suppliers ensures that development programs are anchored around firm expectations on payback.
3. Budget and resources.
   Delivering the hoped-for change and incremental value requires additional budget and specific resources allocated to strategic supplier management activities.
4. Benefit measurement:
   Developing a broad measurement system helps capture full value delivery and drive desired behaviors. The deliverables from strategic supplier management are far more extensive than just cost savings.
5. Process toolkit.
   Creating a consistent but flexible way of working across all strategic relationships requires tools and techniques for understanding and restructuring relationships while driving performance and unlocking value.
6. Education.
   Changing existing practices and behaviors of procurement and stakeholders requires education programs covering technical skills, leadership, and change management.
7. Relationship management.
   Thoroughly evaluating relationship dynamics, dependency, risks, and cultural fit prior to formally engaging strategic suppliers leads to better results.
8. Target benefits.
   Targeting the expected benefits of each strategic relationship gives focus to each team's efforts and supports the overall program business case.
9. Share benefits.
   Creating guiding principles and transparent frameworks for sharing benefits with strategic suppliers encourages collaboration and avoids damaging downstream disagreement.
10. Performance metrics.
    Setting performance standards and balanced scorecards lays the foundation for a long and productive relationship.

This action agenda needs to be built around an investment in “next-generation” leadership and skills designed to build sustained capability. This calls for enterprise-wide activity, not just investment in the procurement community.

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