After today, I want all of you to stop talking about Supplier Relationship Management. All of you. Before I tell you why, we need to step back for a minute and quickly go down memory lane.
Sales people have this thing called Customer Relationship Management – CRM for short. Somebody got cute one day and said “well, if sales has Customer Relationship Management, then purchasing should have Supplier Relationship Management in place. We’ll call it SRM for short.”
And so it came to be.
And our entire profession talks about it, seminars are being taught on it, keynotes are being booked about it, books are being written about it, and it’s ending up in job descriptions and job titles too.
All of this is really fantastic, except for one thing: everyone who is extolling the virtues of SRM is wrong.
Supplier Relationship Management was ill conceived from the very get go. This is not one of those things that was a good idea at the time but not any longer today. SRM was never a good idea.
Anyone who has hired me or worked with me knows that I’m not interested in our profession doing our current practices better, because I think most of our current practices are hurting us and need to be rearchitected.
I’m not interested in improving bad processes. I’m interested in transforming our profession.
I want every single procurement and supply chain management department to be and be perceived as being a Value Added Center of Profit. SRM will not take you to the holy land.
So what’s the problem with excelling at SRM? Isn’t that a good thing? Who could argue with it?
Let’s scenario play here. Let’s say you have a good relationship with a supplier. Actually, let’s say you have an incredible relationship with a suppler. What does that buy your company? What does it buy your business units? What does it buy your stockholders? How does your supply chain improve?
If your suppliers have poor performance or TCO, can you tell your impacted business units “Calm down everyone, I know we can’t ship product because of this and we’re losing revenue and may get sued, but none of that really matters, because we have an outstanding relationship with our suppliers, and that’s what really counts!”
Try that line with a random executive in your company after a supplier’s performance falters and let me know how it goes.
So by now you should be challenging me on what we should be doing. Another easy one. I have my own acronym that I care about: SPM – Supplier Performance Management.
Isn’t that what this is about? Aren’t you supposed to be negotiating and contracting for and ensuring the delivery of Performance Results? Or do you suppose your Board of Directors and Stockholders would much prefer you just have great relationships with your suppliers?
You’ve heard me say it before, and I will say it again, and you will only hear this from me. The #1 problem in procurement today is we are buying goods and services instead of performance results.
And the funny thing is, if you don’t architect the procurement life cycle to be singularly focused on the acquisition of performance results, then you will have supplier performance problems.
And since a contract that was written for goods & services (instead of for performance results) can’t help you resolve those supplier performance problems, you are then forced to rely on………………………..you guessed it…………….your relationship with the supplier to help fix things.
See how that works? Is that how you want to run your business?
After a quarter century of global procurement thought leadership, consulting, publications, and training the Fortune 50, I can tell you that buying goods and services instead of performance results is the root cause of almost all of our problems in procurement and supply chain management today.
And if that is the biggest problem in procurement today, how would having great relationships make everything better? Answer: it doesn’t.
So cancel that class, throw away that book, ditch the article, and recycle everything else that you have that is telling you to pursue SRM.
Aren’t relationships important though? Of course they are!! But that’s included in SPM, and while important, it won’t solve any of your problems all by itself.
SPM is where it’s at. I don’t care what your job description says. You were hired to deliver performance results, and that’s where your focus needs to be.
So let’s get out of the very old and into the new. Or if you prefer, you can keep doing what you’ve always been doing, but you’ll also keep getting what you’ve always been getting. Not on my watch though.
Now go off and do something wonderful.
Be your best!
“THE Godfather of Negotiation Planning” ~ Intel Corp
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