Stage 5: Advance
Stage 5 is about advancing towards targets and goals and realizing the ambition for the relationship in practice. We apply the supplier management process ongoing as we would for any important supplier to monitor, manage and maintain all aspects of risk, contracts and relationship and to manage the supplier within the governance we have agreed with them in stage 4. We also apply the supplier review process but specifically in line with the way we have agreed this will work with the supplier.
At this point in the evolution of our strategic relationship we have moved into a phase of ongoing engagement and progression. It should not be regarded as 'steady state' but rather, as the stage name suggests, ongoing advancement. Key to this is ensuring ongoing joint working, resource sharing and interaction and progress towards innovation projects. In any relationship these activities can easily slip or be deprioritized and so good ongoing project management and governance are essential to ensure the relationship is kept front and centre by all involved.
Finally once a strategic collaborative relationship has been established and is effective, it doesn't follow that such a relationship will continue to work this way, or indeed will continue to be needed. Things change and we need to be prepared for this and identify when it is necessary to intervene or change the relationship. In practice this is about the Supplier Relationship Manager keeping a 'watchful eye' on what is happening all around; what the supplier is doing, what is happening in the market and the changing needs of the business. It is also about ongoing testing, if the relationship continues to work and be appropriate, as it is possible we could reach a point where such a close and collaborative relationship ceases to be so necessary. For example, if we have instigated a strategic relationship because we are completely dependent upon the supplier but a shift in the market opens up new possibilities for us then the need for a strategic relationship could become diluted suggesting we can either reappraise the importance of the supplier, renegotiate our agreement or simply bring the relationship to an end.
Developing the SRM strategy
The SRM strategy is an internal document that defines our ambition for a specific supplier relationship and the means and approach by which we propose to realize this. It encapsulates all key insights and outputs from the first three stages of the SCR process and provides a key decision point at the end of stage 3 for the business to either agree to, and support implementing, the strategy. Developing an SRM strategy for a supplier relationship serves several purposes:
• A basis for agreement and therefore a basis to secure resources and support to progress to develop the relationship.
• A basis for internal communication.
• A means for internal knowledge sharing.
• A catalogue of all the work done to analyse and understand the relationship and basis for the relationship.
• A basis to demonstrate a structured, transparent and rigorous approach to a supplier relationship.
The extent and content of an SRM strategy depends upon the relationship, the supplier and the circumstances. Every situation is unique so every strategy will be unique also depending upon what is needed to fulfil the points above. The SRM strategy should therefore be designed with the purpose in mind. If securing internal resources and buy-in is of primary concern, then the strategy should sell benefits and present a clear and compelling business case. If the need is to document work done then the document might be structured so to do this. Figure 13.7 gives a typical SRM strategy structure with typical or possible sections and content.
FIGURE 13.7 Typical sections and content for an SRM strategy document
SRM strategies require time and effort to compile and are therefore most relevant where intervention is most needed, where we need clarity about how we need to manage a relationship and where we need to secure buy-in and investment to do this. SRM strategies are therefore most relevant for suppliers we have identified as strategic, but could equally be used for other important suppliers as needed or appropriate.
An SRM strategy will typically deal with commercially sensitive information as well as true intention for a relationship that we would not wish the supplier to know. SRM strategies should therefore be considered highly confidential with a very limited circulation internally and strictly not for sharing with the supplier. Whilst we may be advocating a close collaborative relationship of sharing and joint working, it still remains a commercial relationship with a degree of 'arm's length' necessary, so we should never completely reveal our position or thinking; the supplier will be doing the very same.
The strategy is a key supplier-specific document, and forms part of a number of documents we might need to create and maintain for each important relationship. We explored the other components in Chapter 11 and the degree to which these are relevant or necessary depends upon how important the supplier is. Figure 13.8 shows the different components and their applicability according to importance.
International standards for SCRs -ISO11000/BS11000
Before we leave this chapter we need to cover off international standards in this area. There is in fact a British Standard BS11000 for collaborative business relationships, which will become the international standard ISO11000. The standard is designed to help firms avoid the pitfalls of partnership through investing in collaborative business relationships. It provides a framework for all the things that an organization needs to put in place, defines roles and responsibilities and maps out how to make collaborative decision making a reality. Furthermore, companies wishing to adopt such a framework can also obtain certification to the standard by a recognized accreditation body.
It is perhaps curious that there should be the need for such a standard, after all success in important inter-firm engagements depends upon how good the relationship is. Having a standard for how a relationship must work feels somewhat odd and misses the point of what a relationship is and how it should be developed. Yet it could be argued that if firms were about to develop effective inter-organization collaboration then there would be a vast array of knowledge and success stories out there for us all to learn from, and there are not; these are hard to find. So perhaps an international standard can help stage manage the process.
FIGURE 13.8 Different components of a supplier relationship by importance
I have included a section on this standard as it is relevant and may be a consideration for any company embarking on an SRM approach. Obtaining certification to this standard will not bring about an SRM approach, that requires all of the things I have outlined in this book to be in place, but it will provide a framework that helps realize part of this and provides a badge that is visible to the outside world of the firm's commitment and ways of working here. That said there are a number of points for any firm serious about obtaining certification to ISO11000/BS11000 to consider and be cognisant of, if this is part of developing an effective overall SRM programme:
• The standard assumes you know who you need a collaborative relationship with, furthermore the segmentation approach within the standard omits factors such as importance or dependency, which are essential determinants for a key supplier relationship.
• As for any international standard, interpretation of the aspirational requirements into practical steps is required.
• The standard is framed around developing new collaborative relationships from scratch, but in practice a firm will have a mix of new and existing relationships that need to be provided for.
• It assumes a Western culture.
• The crucial linkage to category management is not included.
• The framework outlined is linear and procedural and in practice implementing collaborative relationships may not work this way.
So ISO11000/BS11000 has its place and provides a basis for establishing and improving collaborative relationships, but it is only part of a wider SRM strategy. If the goal of the organization is to achieve an internationally recognized standard for collaborative relationships with strategic suppliers then using the framework of BS11000 is entirely appropriate. The orchestra of SRM, the SCR process and other processes outlined within this book are not alternatives to ISO11000/BS11000 but an entirely complementary approach.