Building a superior supplier management program
Developing a strong supplier relationship management (SRM) program is a high priority for every procurement operation. Supplier relationship management capabilities are essential to release procurement value beyond basic price negotiations. Strong supplier management can deliver significant cost savings, as well as greater revenue, increased quality and improved risk management.
To manage supplier relationships effectively, organizations must develop several key capabilities. Procurement teams must be able to segment suppliers effectively to prioritize resources and relationship management. Defining a formal governance structure and roles is essential for efficiently governing supplier interactions. And organizations must establish a consistent performance management process supported by technology to automate and enable management of interactions throughout the supplier life cycle.
As a leading global strategy and operations consulting firm, The Hackett Group® helps organizations craft a journey to world-class supplier management performance by providing insight on best practices, processes and process metrics. With help from our experienced consultants and advisors, organizations can develop the capabilities, processes, and tools to effectively manage suppliers in complex dynamic supply environments.
Benefits of supplier management
According to The Hackett Group’s 2021 Supplier Relationship Management Study results, superior SRM programs can drive additional cost savings. On average, SRM programs report combined incremental cost savings and operational cost benefits of 3.2%, which represents 26% of total annual savings achieved by procurement functions and 65% of the annual operational cost benefits.
In addition to procurement savings and operational cost benefits, companies that excel at supplier management generate additional value through supplier innovation and higher revenue generation. Yet, top performers consider risk mitigation to be the single greatest benefit of their SRM programs.
Additional benefits of a strong supplier management program include:
- Improved quality
- Improved reliability/delivery performance
- Cost avoidance
- Better relationship quality/fit
- Revenue uplift from supplier innovation
- Improved regulatory compliance
Supplier management with The Hackett Group
The Hackett Group helps businesses design effective SRM programs. Our experienced team helps quickly diagnose current performance and quantify the overall value opportunity of enabling the organization to perform at world-class levels, working collaboratively with key stakeholders to develop and drive the SRM transformation road map.
Our SRM services include:
- Program design and governance. Our teams help identify the roles and responsibilities within the organization that should be tasked with optimizing value from the supply base.
- Supplier segmentation. We help organizations to design a segmentation model to gain visibility into relationship priorities, establish clear guidelines and characteristics for different suppliers, and optimize resources across a broad supplier base.
- Establishing metrics. To measure and manage supplier performance, we help companies establish a common set of practices and tools to ensure adherence to SLAs and performance targets. Our metrics help organizations quantify the value and costs of their SRM programs.
- Advanced capabilities for SRM. We help identify the level of adoption and specific practices to manage the supply base effectively.
- Tools and technologies. Our teams help identify the ideal supplier management technologies for segmentation analytics, SRM workflows, collaborative workspaces, supplier portals and supplier performance analytics.
Additional procurement services
Along with supplier management services, The Hackett Group offers comprehensive services in sourcing and procurement. Our strategic consulting services span the entire spectrum of transactional, talent management and planning processes, as well as functional management.
Our team provides the right combination of capabilities, resources, and approach to help identify and adopt world-class capabilities and deliver maximum value from sourcing and procurement functions.
Our services include:
- Procurement executive advisory
- Procurement benchmarking
- Procurement transformation
- Third-party risk management
With help from The Hackett Group, companies can reduce costs and redirect savings to higher-value activities, while also identifying and mitigating talent risks. We help drive workforce innovation and enable procurement teams to collaborate in new and more effective ways with business leaders. Ultimately, our sourcing and procurement services help enterprises meet their objectives for productivity and market performance.
Why choose The Hackett Group?
The Hackett Group is an intellectual property-based strategic consultancy serving global clients with insight and knowledge drawn from our more than 25,000 benchmark studies with the world’s leading businesses. We offer a broad array of capabilities to facilitate digital transformation, workflow automation, implementation of cloud applications and analytics that enable Digital World Class® performance. Our solutions, exclusive assets and technologies span a broad range of business functions – from integrated business planning and cloud services, to HR operation and process mining.
Founded in 1997, The Hackett Group has global offices in the U.S., Europe and Asia-Pacific and is publicly traded on the NASDAQ as HCKT.
What is supplier management?
Supplier management is the proactive and coordinated management of relationships with vendors to manage and improve their performance, mitigate inherent risks, and use supplier capabilities to innovate and enable internal business processes.
What are the benefits of supplier management?
A mature supplier relationship management program can help organizations achieve value beyond the savings secured during the sourcing process. Supplier management initiatives can support an overall growth agenda, increase innovation, improve access to emerging markets, and promote greater agility and flexibility. Superior programs help to mitigate supply risk, while also incorporating automation to achieve greater efficiency.
What resources do supplier management programs require?
Supplier management programs are built on a set of principles, processes, and tools that establish a governance structure and manage the ongoing operations during the life cycle of each supplier.