The Future of Procurement is SRM

Author: Joe Payne, SVP Source-to-Pay at Corcentric

Editor’s note: This article is part of the MyPurchasingCenter content archive. It was originally published in 2015 and appears here with minor technical revisions. It is worthwhile to note that, while 6 years old, Joe Payne was completely right at the time and still has valuable advice that procurement can implement today.

The more I think about where our profession is headed, the more I realize that everything we do in strategic sourcing and procurement will be centered on Supplier Relationship Management (SRM). When it comes to the evolution of SRM, including where we are now and where we are headed, it reminds me quite a bit of the evolution of strategic sourcing.

To put some context behind that statement, I head up the professional services group for a strategic sourcing consulting firm and I am heavily involved in the process of onboarding new clients. As little as five years ago, my introductory sales decks still defined strategic sourcing, explaining what it was and what value it could bring to an organization. We weren’t selling how we could enhance an existing strategic sourcing function – we were selling the process itself. At that time, outside of the procurement function, organizations needed to be educated about sourcing and why it helps drive bottom line cost reduction – for direct and indirect spend alike.  And we weren’t selling to small mom and pop companies. Large Fortune 500s needed the same education.

Now times have changed. More often than not we are selling directly to a well-established strategic sourcing function within the companies we consult for. And we are selling ourselves as an enhancement and on demand resource that helps extend the reach of a sourcing group, providing market intelligence and cross-industry best practices. But even within the sourcing groups we support, I see the same fuzzy, vague understanding of what supplier relationship management (SRM) actually is, and how it can help organizations drive both bottom line savings and top line revenue growth. Ask five sourcing people to define SRM and I will bet you get five different answers, none of which will lead you to think the program has much merit or value.

So how do we get our sourcing and procurement colleagues, as well as the executive levels of our organizations to recognize the value of SRM? The first step is creating a vision that all parts of the organization that can align with – one that addresses current bottlenecks and problems that need to be fixed, as well creating a future state that improves both the role of procurement and the functions we support as a whole.

Imagine getting access to the most creative and/or technical minds of your most strategic suppliers, aligning on business needs, and co-developing the next generation of the products or services that your company sells.  Imagine getting first access to new technologies and the ability to divert capacity away from a major competitor. A well-established SRM program that includes executive level participation will create these opportunities for top line revenue growth.

Imagine having a system in place where you could easily access spend by supplier, break that spend down in a meaningful way (division, business unit, etc.) and know with clarity what was being purchased from that supplier. Then imagine being able to quickly access the contracts associated with that supplier, as well as a history of the relationship, including scorecards, RFP results and other relevant documentation.  Imagine getting an overview of quality audits, risk assessments and relevant supplier contact information. A comprehensive SRM platform built with data analytics and market intelligence in mind will do just that.

Imagine a sourcing group that spends most of their time building relationships and are measured on supplier enablement, risk mitigation, revenue growth, stakeholder satisfaction and cost avoidance. A governance model for sourcing that is SRM focused will fundamentally change the way we are measured and make cost savings a secondary consideration.

This is the future of our profession, and while a lot of people are talking about one or more of these ideas, few are realizing they are all part of the same concept, which shifts the sourcing profession towards supplier relationship management.

As procurement leaders, we need to move the message around SRM past segmenting suppliers and having quarterly meetings and performance reviews. We need to establish a clear path forward for our organizations that shows a vision and a new way of thinking about the role of sourcing.  We will get there, but it will take time. While we are still in the infancy stages of this new model, I am looking forward to the evolution.