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Elevating SRM from framework to competence · The Leading Edge

• 0:05
  SPEAKER_00: Well, hello again and welcome to the Leading Edge, a series which offers in-depth insights into the key challenges, innovations, and evolving dynamics of the contract and commerce landscape.
• 0:18
  SPEAKER_00: I'm your host, Nikki Mackay, Chief Development Officer of the Commerce and Contract Management Institute.
• 0:25
  SPEAKER_00: Now, in today's episode, Elevating SRM from Framework to Competence, I am joined once again by our very own Tim Cummins, Executive Director of CCM Institute here at the Commerce and Contract Management Institute.
• 0:40
  SPEAKER_00: As supply chain disruption, economic uncertainty, and increasing dependency on strategic suppliers continue to really reshape the business landscape, supplier relationship management has become more important than ever.
• 0:57
  SPEAKER_00: Yet, despite widespread recognition of its value, many organizations still struggle to move beyond policy documents and frameworks towards genuine supplier collaboration.
• 1:11
  SPEAKER_00: So we'll explore what separates organizations that truly excel at SRM from those that simply just talk about it.
• 1:20
  SPEAKER_00: What cultural and structural shifts are required?
• 1:23
  SPEAKER_00: How should organizations rethink measurement, governance, and contracting?
• 1:29
  SPEAKER_00: And what practical steps can leaders take to build stronger supplier relationships that really deliver lasting value?
• 1:38
  SPEAKER_00: So Tim is here to help us unpack these questions.
• 1:41
  SPEAKER_00: Tim, welcome back to the Leading Edge.
• 1:44
  SPEAKER_01: Thank you, Nikki.
• 1:46
  SPEAKER_00: So let's dig right into this very core question about the value of SRM.
• 1:51
  SPEAKER_00: Despite widespread recognition of its value, many organizations seem to still really struggle to embed SRM effectively.
• 2:01
  SPEAKER_00: What do you think, Tim, is the biggest reason that SRM remains a documented framework in many organizations rather than an embedded business capability?
• 2:16
  SPEAKER_01: Well, Nikki, I think the core challenge is that it doesn't fit easily within siloed organizational structures.
• 2:27
  SPEAKER_01: SRM, rather than like contract management, is uh cross-disciplinary in its nature.
• 2:34
  SPEAKER_01: There are a myriad of different stakeholders who would say I've got a role in that.
• 2:40
  SPEAKER_01: Um, and they tend to jealously guard their power, their influence, and their concern that if you've got effective supply relationship management, does that in some way diminish my role, my responsibility, my authority?
• 2:57
  SPEAKER_01: So I would challenge actually to what extent many organizations have really awakened to the importance of supply relationship management certainly as a functional job role responsibility.
• 3:14
  SPEAKER_01: I think most would acknowledge that having good supply relationships is important.
• 3:21
  SPEAKER_01: But what we're then talking about is what is the mechanism through which that can be achieved?
• 3:27
  SPEAKER_01: Is it a broader organizational cultural responsibility, or should there be anointed individuals and perhaps a dedicated function that at least it's the most important relationships, but perhaps more broadly is really mapping and responsible for the quality of the relationship with the supply market?
• 3:52
  SPEAKER_00: Yeah, absolutely.
• 3:53
  SPEAKER_00: So let's just build on that a bit more, Tim.
• 3:56
  SPEAKER_00: Historically, um we know that supplier management has focused on control, compliance, and performance monitoring.
• 4:04
  SPEAKER_00: Um, so let's let's think about what actually separates organizations that use SRM to just manage suppliers from those who use it to really create value.
• 4:17
  SPEAKER_00: What separates those organizations?
• 4:22
  SPEAKER_01: Very often SRM has evolved almost as a some element of procurement.
• 4:30
  SPEAKER_01: Um and uh I think we might talk a bit more about that later.
• 4:35
  SPEAKER_01: But when that is the perceived correlation, it really is then just an extension from post-signature activity into the oversight of performance.
• 4:49
  SPEAKER_01: It's a performance management role.
• 4:53
  SPEAKER_01: And it often gets very confused because is SRM performance management as it relates to, for example, key contracts, or is it performance management around a more holistic relationship with a supplier who may have 20, 30 different contracts running within the company?
• 5:17
  SPEAKER_01: And you know, very often organizations really struggle to get to grips with what is it we're actually deploying it to achieve.
• 5:26
  SPEAKER_01: So the natural fallback very often is for it to become that control function, it's overseeing performance, as opposed to uh perhaps a performance-enabling function.
• 5:41
  SPEAKER_01: And that's I suppose where I would tend to see the big divide between is this about trying to hold the supplier's nose to the wheel, or is it really consciously working to say, how do we work together to make sure the results that are achieved are mutually beneficial?
• 6:04
  SPEAKER_01: It's are we trying to really become a customer of choice, or are we just trying to be a hard taskmaster to keep those pesky suppliers under control?
• 6:18
  SPEAKER_00: Yeah.
• 6:18
  SPEAKER_00: And and Tim, that that relationship really begins long before the contract is actually signed.
• 6:25
  SPEAKER_00: It's something that you talk about a lot.
• 6:28
  SPEAKER_00: Why is it so important to integrate SRM across the entire relationship lifecycle and what happens when organizations don't actually do that?
• 6:38
  SPEAKER_01: Well, yeah, I think Nick, it is inevitably so.
• 6:42
  SPEAKER_01: I mean, you know, if I find somebody in the street that I think I might want a relationship with, but my first action is to um become very aggressive.
• 6:57
  SPEAKER_01: Uh, you know, really again um say, well, I want a relationship with you, but here are my terms for having one.
• 7:08
  SPEAKER_01: That's not really a root to a strong, sustainable relationship.
• 7:13
  SPEAKER_01: And you then finish up either with this continuum that I just talked about of actually, hey, good news for you.
• 7:21
  SPEAKER_01: We don't only beat you up as we get into the relationship, but we're going to carry on doing it throughout our relationship.
• 7:29
  SPEAKER_01: Or do you then start to use SRM as, well, I know we gave you a tough time getting into this relationship, but don't worry, we're going to be nice now.
• 7:41
  SPEAKER_01: Well, somewhat nice.
• 7:44
  SPEAKER_01: It's not building that environment of cooperation of trust, it's not creating that environment of transparency, it's not creating that environment of good, solid, open, and honest communication.
• 7:56
  SPEAKER_01: Because I've been set up in an environment where I don't know how much I can trust you.
• 8:03
  SPEAKER_01: When will that negative behavior start again?
• 8:08
  SPEAKER_01: So SRM, at least from a philosophy perspective, has to be embedded into the way you approach the market, the way you engage with the supply base.
• 8:19
  SPEAKER_01: It changes the content of what you see.
• 8:23
  SPEAKER_01: Now, uh, Nikki, in our other research, we've talked a lot about the point that the contract is not enough.
• 8:31
  SPEAKER_01: In today's market environment, we need to have adaptability, we need to have resilience.
• 8:37
  SPEAKER_00: Yeah.
• 8:38
  SPEAKER_01: If we want to change that, we need to think not only about the content of the contract, the traditional standard template does not create adaptability and resilience, but you also have to see how you're going to augment that contract with appropriate governance.
• 8:56
  SPEAKER_01: And those are the governance principles that actually will steer your SRM behaviors and program.
• 9:03
  SPEAKER_01: It's the agreement over the expectations of transparency, the frequency of meetings, the nature of meetings, what we do when an unexpected event happens.
• 9:18
  SPEAKER_01: We don't know what that unexpected event is because it's unexpected.
• 9:22
  SPEAKER_01: But that doesn't prevent us from having principles in place to say when stuff occurs, this is what we do.
• 9:31
  SPEAKER_01: That's where SRM really starts to step in.
• 9:34
  SPEAKER_01: But if you haven't created those framings right up front, then you haven't got the mechanisms, and nor if you've got the underpinning strength of relationship to be able to weather the downstream changes, surprises, unexpected events, which will often lead to some difficult conversations where you know you may be having a supplier coming and saying, We've got a major supply disruption.
• 10:05
  SPEAKER_01: What are we going to do?
• 10:07
  SPEAKER_01: But so much better when they come to you and talk to you about it than just failed to live.
• 10:13
  SPEAKER_01: And the first thing you know is when you get a short supply or no supply, it's the forums where you can talk about contract suspension or perhaps substitution.
• 10:25
  SPEAKER_01: It's where you're open and honest about your need, perhaps to move for a period of time to an alternative supplier.
• 10:32
  SPEAKER_01: Whatever it may be, it just creates that openness and honesty.
• 10:36
  SPEAKER_01: But if you haven't set the framing for it up front, you haven't got the mechanisms for it in place.
• 10:43
  SPEAKER_00: Yeah, it's fascinating to me.
• 10:46
  SPEAKER_00: It almost that framing creates the backbone of the relationship.
• 10:50
  SPEAKER_00: So when things do become difficult, you're ready to approach it together in an open and honest way.
• 10:57
  SPEAKER_01: And of course, it's not just when they become difficult, it's also how do I make myself the sort of customer that um the supplier wants to talk with about innovation possibilities.
• 11:11
  SPEAKER_01: You know, why am I the one they choose?
• 11:15
  SPEAKER_01: Well, if I've got a very risk-averse contract, I'm probably not gonna choose you to talk about innovation because by its nature, innovation carries risk.
• 11:29
  SPEAKER_01: So if you're a difficult customer and your contract terms are onerous and burdensome, um, I'm gonna go somewhere else with those new ideas.
• 11:39
  SPEAKER_00: Yeah, absolutely.
• 11:41
  SPEAKER_00: It's it's not just when times are hard, it's also seeking out those opportunities and the ability to be innovative.
• 11:48
  SPEAKER_00: Um, does it apply, how does it apply then if you want to build stronger relationships, more collaborative relationships?
• 11:56
  SPEAKER_00: How does it apply to how you measure things?
• 12:00
  SPEAKER_00: Because many suppliers, you know, they focus on scorecards or cost or quality of delivered um metrics, but are there other things that they should be uh measuring if they want to build these stronger relationships?
• 12:16
  SPEAKER_01: Yes.
• 12:17
  SPEAKER_01: I I mean the precise answer to that is going to depend a bit on the model that people decide to pursue.
• 12:24
  SPEAKER_01: So, for example, are you creating SRM as a distinct discipline group of people, or is it an embedded responsibility into other job roles?
• 12:38
  SPEAKER_01: I mean, there are, as we talked from at the beginning, a variety of ways in which you might implement it.
• 12:46
  SPEAKER_01: If we take for a moment the parallel, because of course it's always essential to remember that relationships are bilateral, sometimes multilateral.
• 12:58
  SPEAKER_01: So one of the weaknesses that people often fall into or traps they often fall into is they try to define relationship management as if it were in some way a unilateral discipline that is imposed on the counterparty.
• 13:17
  SPEAKER_01: Um if we take for a moment the analogy with account management or relationship management from a supplier's point of view, then of course we have some direct parallels to look at.
• 13:32
  SPEAKER_01: And usually for a critical customer, um, a supplier will have dedicated account management of some sort.
• 13:42
  SPEAKER_01: And certainly for the most important customers, that will often be um a relatively senior account executive who has quite a significant voice in the business and access to decision makers.
• 13:58
  SPEAKER_01: It's very rare to find that equivalent on the supply relationship side.
• 14:04
  SPEAKER_01: And so that question of what power and authority we're going to give to SRM is, of course, fundamental and will, of course, alter the nature of the metrics.
• 14:16
  SPEAKER_01: But it's very clear with an account executive that aspects of have we got a happy customer is a component of the metric.
• 14:26
  SPEAKER_01: Um and in part that's measured by are they giving us repeat business?
• 14:32
  SPEAKER_01: What share of spend are we getting relative to competition?
• 14:36
  SPEAKER_01: Um are we getting new opportunities from them?
• 14:40
  SPEAKER_01: But very often the count executive will start to be measured much more on relationship health indicators, on aspects of to what extent are we able to use this customer for um for new ideas, for innovation, etc.
• 15:00
  SPEAKER_01: Uh, to what extent have we got a customer who is prepared to stand up and speak positively about our reputation?
• 15:10
  SPEAKER_01: So you begin to get a much wider set of indicators of business value, not just have we driven down cost, have they complied with the terms, has delivered been on time?
• 15:24
  SPEAKER_01: It's not that those things are unimportant, but they are consequences of a good relationship, they are symptoms of a good relationship, they are not what drives a good relationship.
• 15:41
  SPEAKER_01: Yeah.
• 15:41
  SPEAKER_01: So we talk a lot about um the introduction, particularly in something like SRM, of what we call OKRs, objectives and key results.
• 15:51
  SPEAKER_01: So, what are the objectives we have with these strategic suppliers?
• 15:56
  SPEAKER_01: We need to sit down and think those through.
• 15:58
  SPEAKER_01: Those should flow into the measurements of a successful SRM.
• 16:03
  SPEAKER_01: And that may well be things like did we hold all of the scheduled meetings that were scheduled to be held, or was you know, supposed by the governance principles that they were going to happen?
• 16:17
  SPEAKER_01: Do we have clear evidence of transparency, of early warning when there are going to be problems?
• 16:24
  SPEAKER_01: So is this a proactive relationship or a reactive relationship?
• 16:31
  SPEAKER_01: Um we may well want to want to take a formal and specific relationship health check.
• 16:40
  SPEAKER_01: Um we may want to have SRM very clearly running uh voice of the supplier type studies where we're actually looking for scores that say, you know, on our voice of the supplier survey relative to competition, you know, we want to be in the top three companies worldwide.
• 17:02
  SPEAKER_01: Um so you begin to really change the mechanics from inward looking to much more outside in looking to say, is this relationship healthy?
• 17:15
  SPEAKER_01: Is it sustainable?
• 17:17
  SPEAKER_01: Is it providing optimal business value to us?
• 17:22
  SPEAKER_01: And is it providing sufficient business value to the counterparty that we are somebody they really want to do business with?
• 17:32
  SPEAKER_00: Yeah, absolutely.
• 17:34
  SPEAKER_00: Um Tim, I wanna I want to move on to uh a question of the the sort of delicate balance between relationships and contracts because there's often this perception that contracts and relationships are completely separate disciplines, right?
• 17:53
  SPEAKER_00: Um so how how do you how do organizations use or utilize their contracts to actually enable that trust and flexibility and collaboration and not seeing them as completely separate disciplines?
• 18:07
  SPEAKER_01: Yeah.
• 18:08
  SPEAKER_01: Yeah.
• 18:09
  SPEAKER_01: Well, I think we touched on this briefly before when we were talking about timing of engagement, because the relationship, the design relationship, should be influencing the commercial framing that that informs the nature of the contract.
• 18:30
  SPEAKER_01: So, all too often, Nikki, we've got something always say, you know, this is really a critical relationship.
• 18:38
  SPEAKER_01: The outcome that we're trying to achieve is business critical.
• 18:42
  SPEAKER_01: And then having determined that actually what we really care about is outcome, or what we really care about is quality of performance, or what we really care about is a flexible adaptive, you know, we've we've got a concept of what we want to achieve, but right now we're not quite sure how to achieve it.
• 19:05
  SPEAKER_01: But very often, while somebody might have sat back and said, okay, then what sort of relationship do we need to achieve that?
• 19:15
  SPEAKER_01: Very often that hasn't been thought about.
• 19:18
  SPEAKER_01: And very often what we do is say, uh, okay, um, well, this is uh a technology contract.
• 19:27
  SPEAKER_01: So uh where's our template for technology contracting?
• 19:30
  SPEAKER_01: Oh, here it is.
• 19:32
  SPEAKER_01: Let's just deploy the template.
• 19:34
  SPEAKER_01: But that template may be completely ill-suited to driving performance, driving an outcome, creating an agile development model.
• 19:44
  SPEAKER_01: So we often force fit a relationship or compromise the relationship by force-fitting it into a contracting structure that is completely inappropriate.
• 20:00
  SPEAKER_01: What do we need to do?
• 20:02
  SPEAKER_01: We've got to determine what is the relationship we need to achieve what we're trying to achieve.
• 20:07
  SPEAKER_01: What's the commercial framework for that, by which I mean, what's the pricing and charging model?
• 20:12
  SPEAKER_01: Is this something where we can realistically go for a fixed price?
• 20:16
  SPEAKER_01: Is it something where we need to go time and materials?
• 20:18
  SPEAKER_01: Is it something where we actually set milestone pavements and reviews?
• 20:23
  SPEAKER_01: Very different models that we can go with when it comes to the charging, and we then need a commercial framing that matches to that.
• 20:33
  SPEAKER_01: I touched already on the point that today, any long-term relationship really needs an adaptive form of contract.
• 20:42
  SPEAKER_01: We've seen with our geopolitical studies that today organizations don't have adaptive contracts.
• 20:50
  SPEAKER_01: And so the relationship is often becoming very fragile, very contentious, because the contract lacked the mechanisms to manage the changes that are needed in today's unpredictable business environment.
• 21:07
  SPEAKER_01: The contract must be suited to the nature of the market and the nature of the relationship that's going to operate in that market.
• 21:15
  SPEAKER_00: Yeah, absolutely.
• 21:17
  SPEAKER_00: I think you've pretty much answered my next question, but maybe you can add to it because I think you just mentioned the geopolitical research, and it is very interesting because when we look back at COVID, we saw this very collaborative approach where everyone was willing to just work together and get things done.
• 21:34
  SPEAKER_00: Whereas the current environment that we're operating in of complete uncertainty, um, it's it's causing everyone to not work together collaboratively.
• 21:46
  SPEAKER_00: So looking ahead over the next five years when uncertainty is just the norm, what do you think will really distinguish organizations that really are excelling in supply relationship management in this?
• 22:00
  SPEAKER_00: Operating environment over the next five years.
• 22:03
  SPEAKER_01: Yeah.
• 22:04
  SPEAKER_01: Yeah, I mean, we we've got to we seem to have a touch of schizophrenia right now, as you're right to say.
• 22:11
  SPEAKER_01: COVID was a situation where it was universal.
• 22:14
  SPEAKER_01: There was no question it affected everybody.
• 22:16
  SPEAKER_01: It affected, you know, buyers' workforces and suppliers' workforces.
• 22:20
  SPEAKER_01: Shutdowns didn't apply to one side or the other.
• 22:25
  SPEAKER_01: So suddenly the recognition was, well, actually, let's put the contract to one side for a moment.
• 22:33
  SPEAKER_01: We've got to work out what we're going to do to help sustain our businesses.
• 22:37
  SPEAKER_01: So how can we cooperate, collaborate to do what we need to do?
• 22:42
  SPEAKER_01: It doesn't mean that there weren't some instances, of course, where people did go to the contract.
• 22:48
  SPEAKER_01: You know, if you look at the real estate industry, you know, there was a tremendous conflict with companies saying, oh, hold on, okay, maybe this means I don't have to pay my rent.
• 22:59
  SPEAKER_01: Maybe this means I can terminate a lease.
• 23:03
  SPEAKER_01: So you did have examples, certainly, where COVID led to very real conflict.
• 23:08
  SPEAKER_01: But in many cases, certainly if there was any long-term dependency that, well, one day we're going to emerge from this, so we'd better work away to survive it.
• 23:18
  SPEAKER_01: Today it isn't necessarily impacting both sides.
• 23:23
  SPEAKER_01: Um, if there's a supply shortage, you know, it's easy for the customer to turn around and say, that's your problem.
• 23:30
  SPEAKER_01: You know, fix it.
• 23:31
  SPEAKER_01: Um if if there's a tariff increase, there's a natural inclination from the customer to say, you absorb it.
• 23:42
  SPEAKER_01: If there aren't provisions in the contract that actually generate the conversation, what we're seeing with our geopolitical study is that the tendency is to get focused right in on the specific issue of I want to change the force miserable visions.
• 24:01
  SPEAKER_01: You can't.
• 24:02
  SPEAKER_01: I want to build in more flexible price adjustment mechanisms.
• 24:08
  SPEAKER_01: I want to build in suspension rights or um diversion of supply.
• 24:13
  SPEAKER_01: No, you can't.
• 24:15
  SPEAKER_01: And we're looking at it topic by topic, issue by issue, rather than stepping back and saying, actually, this is picker.
• 24:24
  SPEAKER_01: This is not about a single event.
• 24:27
  SPEAKER_01: This is about a market shift that has changed the way we need to work together, not just now about tariffs or about supply disruption or about embargoes or about sanctions.
• 24:41
  SPEAKER_01: This is building a relationship and a contract framing that can deal with and manage those surprises, those issues as they arise in a more constructive way, rather than I need this when you can't have it.
• 25:00
  SPEAKER_00: Yeah.
• 25:00
  SPEAKER_00: And that's for sure, Tim.
• 25:02
  SPEAKER_00: The uncertainties and the challenges are not going to go away.
• 25:05
  SPEAKER_00: So it's really time to dig deep and look into how we're framing things from the get-go.
• 25:12
  SPEAKER_00: Um, I've really enjoyed this conversation.
• 25:14
  SPEAKER_00: Thank you so much, Tim.
• 25:16
  SPEAKER_00: Unfortunately, that's all we have time for for the leading edge.
• 25:19
  SPEAKER_00: Um, I think if there's one takeaway from today's conversation, it's that successful supplier relationship management isn't about having a better framework.
• 25:28
  SPEAKER_00: It's about building the behaviours, structures, and relationships that turn collaboration into genuine business capability.
• 25:36
  SPEAKER_00: And as we've heard today, the organizations seeing the greatest value from their supplier relationships are those that move beyond compliance, that actually break down silos and measure what truly matters and use both contracts and relationships to drive shared outcomes.
• 25:54
  SPEAKER_00: So thank you to Tim for joining me today and sharing your insights.
• 25:59
  SPEAKER_00: And thank you for listening.
• 26:01
  SPEAKER_00: If you like what you heard, stay tuned for our next episode where we will continue to explore the ideas, innovations, and leadership shifts shaping the future of commerce and contracting.
• 26:13
  SPEAKER_00: Until next time, keep collaborating, keep innovating, and keep leading.