What value does Supplier Relationship Management deliver for business?
New Capgemini research highlights the disconnect between the business imperatives for 2007 and the utilisation of current procurement systems.
21 September 2006
Thursday, 21st September, 2006 - Capgemini has today announced some of the findings of its most recent research into the management of supplier relationships, entitled ‘What value should you expect from Supply Relationship Management’. The research looked at the priorities for European Chief Purchasing Officers (CPOs) from six countries for the coming year from a variety of vertical markets and then looked at the disconnect between these priorities and the current use of purchasing and procurement systems both by businesses in general and by users of the systems. Purchasing remains a key issue for European businesses who could expect to save 10-25% on their purchasing costs with an effective system, depending on the organisations’ spend complexity and maturity of procurement.
SRM is defined as creating an all-encompassing strategy where suppliers connect to your business in real-time, enabling you to gain control of your companies’ direct and indirect spend, transforming suppliers into business partners and extending applications to create value.
Key findings of the research are as follows:
- CPOs believe that the most significant business driver for 2007 is leveraging preferred supplier relationships, this means compliance to contracts and improved visibility of spend with these suppliers
- CPOs also report a significant increase in focus on supplier relationship management, including performance measurement and supplier development
- Public sector CPOS show evidence of a governmental drive for greater value improvement
- A unique focus for financial services is commodity outsourcing. Financial services tend to lead the way in sophistication when it comes to purchasing
- Legislative issues such as SOX are a growing focus area, feedback suggests that businesses are still responding to legislation in a reactive way rather than devising a proactive strategy
Contrary to these positive focuses which SRM can address, the research, which also surveyed users of the purchasing systems, showed that many businesses, despite having implemented systems, are not using them to their full potential and have got the buy-in of system users.
- Survey results showed CPOs have a strong desire to standardise across the sourcing process but Capgemini found that auctions and e-sourcing have very limited take up within business with prevents standardisation
- Less than 5o% of SRM users use the application to track orders, typically they take information out of the system and run reports separately on order management. 20% of users always track orders outside of the SRM system
- Only 7% of purchasers use the reporting functions contained in the application. 35% never use this function at all which should have been designed to enable accurate reporting
- Many purchasers use spend information to prepare contracts but less than 40% of purchasers can access the spend information on their SRM application, for 60% of users this information is inaccessible even though it does reside in the system
- 30% of users said they would need training to use the SRM application effectively
Mario van Vliet, Global Supply Chain Management Leader at Capgemini, comments: “There is still a lot of confusion in the market about what true SRM is. This is compounded by the fact that SRM can be complex to deploy and integrate. Many businesses don’t spend enough time identifying the business processes and procurement channels that will be affected by an implementation and find that they get stuck half way through the process without being able to realise the cost savings they had predicted. Businesses need to get advice before an implementation, or seek consultancy on how to bring an implementation back on track to deliver real business advantage. Companies who have effectively rolled out procurement systems find that they reduce the administration involved with procurement, find compliance much easier, can reduce time to market for competitive advantage and attract better purchasing professionals into their business.
Capgemini’s SRM definition
Capgemini recognises that most purchasing managers rarely speak of SRM in terms
of software support of processes, they talk about supplier relationships and managing
product categories. Capgemini has a broader definition, identifying three key
stages of SRM development within an organisation ; coordinated procurement and
harmonisation of channels, ‘closing the loop’ between the strategic sourcing cycle
and the and the procurement order cycle, embedding the procurement strategy into
the core of the enterprise and integrating it with key suppliers to develop mutually
beneficial relationshps. Capgemini contends that companies can make sustainable
savings from moving up the procurement maturity ladder from eprocurement to SRM.
Procurement should mature to focus on the ‘bigger picture’ including:
- Strategic vs. tactical sourcing
- Emerging market sourcing
- Multi-language requirements
- Supplier integration
- Support for complex goods and services
- Integration and coverage for MRO
- Global deployment and merging ERP
About Capgemini
Capgemini, one of the world’s foremost providers of Consulting, Technology and
Outsourcing services, has a unique way of working with its clients, which it calls
the Collaborative Business Experience. Through commitment to mutual success and
the achievement of tangible value, the company helps businesses implement growth
strategies, leverage technology, and thrive through the power of collaboration.
Capgemini employs approximately 61,000 people worldwide and reported 2005 global
revenues of 6,954 million euros.
Capgemini Consulting is the management consulting discipline of the Capgemini Group. We offer transformational excellence through understanding specific customer needs in all business sectors. Based on our strong functional expertise and our ability to accelerate change, we collaborate with customers to design the best strategies and execute the transformation, impacting both business results and growth. Across the globe, Capgemini Consulting has 5,000 management consultants.
More information about individual service lines, offices and research is available at www.capgemini.com
For further information please contact:
Tom Lodge or Sara Lee
Inferno Communications
0208 434 5500
capgemini@infernopr.com
