How do you get the most from supplier relationship management (SRM) software?

Part 1. Lots of talk of SRM lately.

It’s a subject that really has come to prominence, both during and in the wake of the pandemic in the clamber for better resilience. Though fair to say as recently as 3 years ago, SRM was still very marginalised. To find out why, we need to go back – way back!

Let’s start by pointing out that SRM as a discipline has been around for many years. In fact, in a 1983 HBR article, McKinsey consultant Peter Kraljic suggested that corporate buyers needed to be more proactive in their efforts to improve performance through supply management activities. The original HBR piece from 1983 is right here

Historically, those activities were by and large subjective processes reliant on feeling and interpretation. This was due to a lack of measurable data and was further hindered by the relentless pursuit of reducing cost. As a result, the relationship – as in the ‘R’ in SRM, was for all intense purposes, overlooked in favour of more addressable spend management exercises.

Over time, a more balanced, service-centred approach to performance slowly started to emerge. Though as alluded, two seemingly immovable blockers remained powerful influencers.

For years supply chain was viewed as an overhead; and as is the case with most overheads, the emphasis tends to be on driving cost down. Which worked out well for procurement and supply chain professionals who were still adopting cost based approaches to supplier management.

Now let’s look at the technology piece. 

Technology excels by responding to product market fit. It sets out to address a challenge. So when we start to think of emerging technology in this particular space, we can clearly see it was working to a cost saving brief. It had very little to do with collaboration and relationship management and even less to do with managing strategic objectives.

A look at the landscape shows us the evolution in the sector. Until recently, and by that we mean the start of the pandemic, the procuretech landscape was bristling with source to pay (S2P) software – typically the earlier end of the engagement lifecycle.

Across the world as the pandemic continued to take its awful toll, although several major events occurred in the decades leading up to the pandemic – it was Covid’s knockout blow that saw the great and the good, the likes of McKinsey and Gartner to name two, state the case for urgent business investment in relationship driven resilience on the part of the procurement and supply chain profession. This then would actually go a long way in shifting the dial in the case for meaningful SRM.

Philosophy – a theory or attitude that acts as a guiding principle for behaviour. We believe that relationships are the central enablers of everything. Our belief, or philosophy. In our opinion, the philosophy of SRM software has come along way, is on an amazing journey, and yes still has a long way to go. 

Part 2. An eye on the tech.

Clearly we speak to people all the time. Many of them say they’ve used SRM systems before, but that they’ve never really seen one that works! This needs to be understood.

Ok fair to say that’s before they’ve toured Suppeco. We’ll assume at reading this article that neither have you. Fix that right now – Say Hi! Take a tour! So let’s demystify, and shine some much needed light on the situation.

What’s the definition of SRM software?

Supplier relationship management (SRM) software is a type of traditionally enterprise software that intends to help organisations manage and improve their supplier relationship engagements, to  deliver against their strategic or non-strategic objectives.

Based on several factors, just like any enterprise software, SRM systems can vary in their performance.

A few reasons why:

1 Poor fit with company’s needs: SRM systems can of course differ greatly. Increasingly, tech is built to be best-of-breed and is priced accordingly, which essentially means that it specialises in a range of disciplines rather than being a full end to end suite. So it’s important to understand user requirements and to select a solution that meets specific company needs. If the software selected does not align with a company’s requirements, it’s probably not going to perform well.

2. Insufficient training and support: SRM software can be complex to use. (Though we’d just like to say at this juncture that it shouldn’t be). Even so, it’s important that users receive adequate training and support to fully leverage its capabilities. If users aren’t properly trained or supported, chances are they’ll not use the software effectively, which can impact performance and result in poor user experience.

3. Poor integration with existing systems: SRM software may need to integrate with other, legacy systems, such as ERP, CRM, or other best-of-breed procurement tools. If integration is not done correctly or seamlessly it can impact the performance or usability of the SRM solution.

4. Poor data quality: SRM software relies on accurate data to make informed decisions about engagement and performance. If data is incomplete, outdated, or inconsistent, it can impact the performance of the software. Read our article on deploying effective KPIs.

5. Lack of user adoption: The success of SRM software may well depend on widespread user adoption and engagement. Not every time, but either way, If users are not motivated to use the software, or if it’s not designed to be easy and intuitive to use, it probably won’t perform well – quite simply because people won’t want to use it.

6. Lack of supplier use or buy-in: Modern SRM software should generally encourage the participation of both customer and suppliers on the system – as this provides an opportunity to collaborate. So where suppliers decide not to participate, or worse do not have the facility to contribute, this may well indicate an issue with system function and access, ease of use, or understanding on their part. It may also impact system performance resulting in poor user experience. Equally though it may correctly indicate poor supplier performance.

7. Doesn’t do what it’s meant to: SRM software by virtue of its very name is meant to manage and improve customer-supplier relationships. The fact is however that many systems have had very little to do with or even an understanding of relationships, especially more complex and collaborative engagements. Historically, SRM systems have tended to be KPI performance dashboard systems. The important and telling functionality gap resulting in constrained success dictated by the limitations of the tool at the company’s disposal; leading to an uninspired user experience, consisting of missed opportunities for collaborative value creation.

Setting sights realistically means that a best-in-breed panacea is 100% achievable.    

SRM software clearly has the potential to unlock significant value for organisations. But as we’ve seen, impacted by various factors, its performance can vary greatly. It is important to carefully consider these factors when selecting and implementing an SRM solution to ensure it meets an organisation’s requirements, expectations and therefore is able to deliver the desired outcomes.

As the saying goes, you can’t please everybody all the time. There is no such thing as a one size fits all panacea. It simply doesn’t exist. But if it’s supplier relationship management software that you want, make sure it does number 6 and number 7 on our list. If it doesn’t then it’s not SRM software.