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The outlets for procurement and supply chain news have no shortage of recommendations for improved business processes, new ideas, and technologies your department should implement to “modernize” or “optimize” or any number of other “-izes”. If you have read any of Source One’s contributions – here, on other publications, or on our own blog – we make just as many recommendations.
The key assumption behind all of these recommendations is that your procurement group has the time and resources to implement them. As our own studies have shown, roughly 30% of the groups out there are under-resourced, so it is very likely that your group does not have surplus time or resources. Even if it does, the number of new strategic initiatives pursued is limited. Any new undertakings must be carefully selected and executed.
With that in mind, this article will weigh the merits of two of the more popular recommendations – making investments in internal marketing and supplier relationship management – and establish the conditions for when each should be pursued.
What is Internal Marketing?
Internal marketing efforts are undertaken by a procurement group to promote their efforts, initiatives, and (in most cases) successes to others in the organization. This is done in an attempt to gain the approval needed for more support and involvement from the organization by building trust and buy-in. Internal marketing efforts include things most groups should be doing anyway – reporting, maintaining project transparency, etc. – but also include training and gaining influential stakeholders’ favor to use them as sponsors.
A procurement group might invest in an internal marketing program to increase visibility for their work, giving them a chance to display their abilities to generate a Return on Investment in a relatively short period. Increased exposure, in turn, sets the department up to receive more work and ensure sustainable results. It also encourages increased interaction with other departments, allowing procurement to become more deeply involved in supporting the overarching goals of the company.
Common dangers associated with internal marketing initiatives include, to put it bluntly, an audience that is apathetic towards procurement’s efforts. Internal marketing messages can fail due to them being distributed to a deaf audience – either because the messaging gets lost or because it is is ineffective. Worse yet is getting the message out, having it heard, and having recipients actively ignore it due to a lack of interest in the process or in procurement itself.
What is Supplier Relationship Management?
Supplier Relationship Management, or SRM, can be simply described as a program with a set of processes, principles, and tools to manage suppliers within all areas of a company during the entire supplier lifecycle. SRM drives a consistent way for interacting with and managing suppliers. The ultimate goal is improved relationships and continuous improvement from the supply base. SRM programs aim to derive value from the totality of supply relationships, from preferential pricing and rates, to early access to resources and new technology, in order to develop a competitive advantage in the market place.
In order to reach the Relationship part of SRM, the basics need to be managed first. These basics include contract management, supplier performance management, P2P processes, status meetings, and KPI development. These basics must have reached a business-as-usual state before considering a supplier for further development into a real partnership. Therefore, efforts dubbed SRM can range in effectiveness depending on the individual organizations and suppliers’ maturity on the SRM learning curve.
OK, So When Should We Pursue Each One?
In an ideal world, a department should be able to begin these initiatives simultaneously, or in either order, so there is no need to prioritize. That said, many groups that have not utilized either find that SRM is easier to implement, simply because it is a self-managed process. In other words, no resources outside of procurement are needed for its implementation or management, and, while specialized software may help in some management tasks, implementing an SRM program does not require any non-standard tools or services.
Internal marketing, on the other hand, involves hurdles that can render it ineffective if procurement does not have a strong record of measurable success, or is treated as/confined to a tactical role. Internal marketing efforts will not fare well without successes to promote and an accepting audience to promote them to – only one of which can be completely managed and controlled by procurement. The risk is higher, but so is the potential reward. An internal marketing strategy can offer significant rewards in terms of the depth and size of procurement’s corporate involvement, so it should be undertaken as soon as the conditions exist for to be effective.
Strategic action has proven time and time again to be a key growth facilitator for procurement groups large and small, and a requirement for ongoing future success. If your department is stuck in a tactical role and looking to advance strategically, consider a 1-2 punch of SRM, followed by Internal Marketing of the program’s successes.