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In this, the first of two guest posts, Procurement Leaders invites 360 Supplier View’s Declan Kearney to look at the gap between the strength of today’s CRM systems and the road that lies ahead for supplier management technology.
The leverage of Customer Relationship Management (CRM) systems and best practice dates back to the ’database marketing’ of the 1980s. Today, cloud-based CRM offerings such as salesforce.com, Sage, Oracle’s Siebel and MS Dynamics are commonly used in many small and most mid-sized and large businesses.
I’m frequently asked if CRM tools could be used for the purposes of Supplier Relationship Management (SRM), and though I can understand the enthusiasm, I would consistently advise that this is not a worthwhile strategy. CRM technology and best practice do share a few principles of SRM in the areas of contact management, activity and communications management (e.g. logging of emails, phone calls, meetings and events). However, the processes, scope of cross-functional stakeholders, key objectives, performance management and reporting of SRM are far removed from the CRM equivalent.
The sales and marketing use of CRM to track pipeline (i.e. new business opportunities) is the equivalent of the customer’s use of sourcing tools to track current and pending new requirements. The ultimate mutual position of communications is where the supplier’s records of ’pipeline’ mirror exactly the customer’s pending requirements.
In order for this position to prevail, close co-operation and collaboration, in the form of a mutually beneficial relationship and sharing of information, must exist between customer and supplier. This will only exist where the supplier and customer both view the relationship as strategically important.
To determine this position of reciprocity, effective mapping of your supplier segmentation to your supplier’s customer preferencing (the reciprocal view of the relationship) is required. Over recent years, the ambitions of applying SRM to potentially the ’top 100’ suppliers has been tempered. It is now commonly recognised that without a high level of SRM skills, resources and enabling processes and technology, companies can typically manage no more than 25 truly strategic supplier relationships.
CRM can operate without integration with or alignment to other internal systems. However, one of the reasons why SRM best practice and technology adoption continues to lag CRM is that SRM cannot operate in isolation of two tightly related areas of supplier management: supplier information management and supplier risk management. From experience, I have seen many SRM initiatives struggle due to a lack of alignment with these and other related elements of supplier management.
When each element of managing suppliers (from financial management to spend analysis, sourcing; contract, performance, relationship, information, risk, compliance, sustainability and enterprise collaboration) is considered, the obvious conclusion is that best practice supplier management is far more complex that its CRM equivalent.
While it is an over-used and somewhat exhausting catch-phrase, the potential of addressing the complex requirements of supplier management does represent a major opportunity for procurement. Regardless of functional ownership, investment in and messaging around supplier management must be removed, internally and externally, from the ’cost/price’ agenda and requires cross-functional involvement from the outset.
We’ll look at how and why in my next post.
Declan Kearney is founder and principal at 360° Supplier View.