Strategic Supplier Relationship Management

Accenture outlines the benefits of strategic supplier relationship management—its unique approach to helping companies move toward it.

Accenture High Performance Business research has demonstrated the connection between procurement excellence and the attainment of high performance. Companies in today’s multi-polar world, which is characterized by long and complex supply chains, are thus focusing on a strategic relationship with their suppliers. Other trends driving this approach are:

• Volatile commodity prices. The focus on lowest commodity prices is shifting to an assessment of which suppliers are strategic and understanding interdependencies.

• Supply risk. Companies are assessing the financial health of their suppliers and then forming relationships with their closest business partners. The question is whether to procure from a wider range of suppliers or to work more closely with a smaller group.

• Cost reduction. Aggressive cost-reduction negotiations can damage relationships in the long term. Collaborating with suppliers increases quality and sparks innovation to drive out cost dramatically.

The main benefits of strategic supplier relationship management correlate to the trends described above. They are:

• Responsiveness to volatile commodity prices. Strong supplier relationships can confer the ability to react favorably to volatile commodity prices.

• Reduced supply risk. Stronger supplier relationships enable a better view into supplier data and processes—and thus better management of risk.

• Lower costs. The investment required to implement strategic relationship management yields direct financial benefits from more spending under contract, increased contract compliance, improved supplier performance, greater focus on quality and so on.

• Innovative products and services. Companies with strong supplier relationships are better able to bring new products to market quickly, giving them a competitive edge.

• Continuous improvement. Building close relationships with a select group of suppliers can create additional value continuously.

• Greater corporate social responsibility. By working closely with their supplier base, companies are preventing the reputational damage, erosion of shareholder value and loss of market share that can arise from non-compliance with environmental regulations.

• Improved sustainability. Better collaboration with suppliers naturally leads to a more efficient use of resources.

Based on its extensive experience and research-based understanding of the role procurement excellence plays in achieving high performance, Accenture has developed a unique approach to helping companies move toward a more strategic relationship with their suppliers. This approach is based on six guiding principles:

• Supplier relationship management should be done from the top down.

• Supplier relationship management begins with the sourcing process.

• Each supplier segment should have a customized supplier relationship management approach.

• Both parties should benefit from the relationship.

• Contract and compliance management are integral to supplier relationship management.

• Supplier relationship management goes beyond the implementation of an IT package, and must include a well-defined vision, strategy and key performance indicators supported by clear processes and tools.

Contact us to find out how Accenture can help your organization develop a supplier relationship management strategy.