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2018GLOBAL SRM MATURITY REPORTSRM Benchmarks and Insights from 250 Companies Worldwide
2
WITHOUT DATA,
YOU’RE JUST ANOTHER PERSON
WITH AN OPINION
W. Edwards Deming
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The SRM Maturity Check Summary ................................................................................................................................................ . 4
Key Findings and Forecasts - An Overview .................................................................................................................................................5
The SRM Maturity Check ...................................................................................................................................................................6
Survey Objectives and Parameters ................................................................................................................................................................. 6
Survey Demographics ......................................................................................................................................................................................... 7
SRM Development from 2017 to 2018 .............................................................................................................................................8
More Transparency With a 360° View ............................................................................................................................................................12
KPIs and Performance ..........................................................................................................................................................................................13
Does Supplier Classification Make Sense? ..................................................................................................................................................14
The Supplier: Partner or Tool? ..................................................................................................................................................... 15
More Than Just a Price Reduction .................................................................................................................................................................. 17
The Right Strategy For Success ..................................................................................................................................................................... 18
Conclusion ....................................................................................................................................................................................... 20
Supplier Management 2030 .......................................................................................................................................................... 21
Appendix: Survey ............................................................................................................................................................................. 22
CONTENTS
4
The second annual SRM Maturity Study, The SRM Maturity Check
2018, was conducted worldwide between January 8th and April
8th. In total, 250 procurement specialists from Europe, Canada,
Brazil, the Middle East, China, and India participated in the survey.
The survey asked companies about the current state of their
supplier management processes, and if they planned to implement
an SRM solution or already had one in place.
THE SRM MATURITY CHECK SUMMARY
250 PARTICIPANTS
21% AMERICA
58% EUROPE
16% ASIA
2% AFRICA
26COUNTRIES WORLDWIDE
>20 DIFFERENT
INDUSTRIES
> € 500
MILLION IN REVENUE
> € 50 - € 499
MILLION IN REVENUE
< € 50 MILLION
IN REVENUE
44% 23% 33%
1
2
3
4
3% AUSTRALIA
4
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The results of the study reveal important insights into the current
state of supplier management in procurement, particularly
regarding the effects of company size, structure, and industry
on current SRM practices. Following the trend established in the
Global SRM Maturity Report 2017, SRM solutions are still most
commonly used in the manufacturing industry in 2018. This is
primarily due to the fact that companies in this industry already
began optimizing and investing in procurement several years ago.
The implementation of an SRM software solution resulted in more
efficient resource planning and improved transparency. Banks,
financial service providers, and insurance companies, on the other
hand, are lagging behind when it comes to the implementation of
SRM solutions.
The size of the company is also a factor and the results indicate that
larger companies with a high revenue have more mature supplier
management processes than small or medium-sized enterprises
(SMEs). This is largely due to the fact that bigger companies tend
to have more complex processes, a decentralized procurement
structure, and many different contacts and suppliers, which all
present challenges that require efficient supplier management.
Monitoring and reporting, for example, take a lot of time, and by
implementing a digital solution, procurement departments can
save time and resources for other tasks.
SRM solutions will play an increasingly important role in building
and maintaining strong partnerships with suppliers in the future.
As companies zoom in on the structure and organization of
their own personnel, they often lose sight of the importance of
supplier management, and may not even consider implementing
digital solutions for SRM. By not implementing an SRM solution,
however, companies are missing out on the opportunities that
result from having a complete overview of their global supplier
information. Powerful digital solutions can process, organize, and
analyze huge amounts of data at high speed, leading to improved
transparency that extends well beyond tier-1 suppliers. Without
a software solution, it can be nearly impossible to efficiently
monitor and analyze hard facts, such as delivery reliability data,
and soft facts, such as risk or quality data, simultaneously. This
makes it difficult for companies to identify potential threats early
on, which has a negative impact on a company’s ability to remain
agile. If companies fail to recognize potential problems before
they happen, they may not be able to respond in time, which can
have disastrous consequences. A digital SRM solution can greatly
improve this situation and increase transparency and agility. This is
critical for building strong relationships with suppliers.
So far, large companies (62% with more than 500 million euro in
revenue) have been leading the way in adopting SRM technology
and implementing SRM solutions that provide a holistic, 360° view
of their supplier information. A central dashboard in the application
shows an overview of all of the relevant supplier information,
certificates, order history, supplier scorecards, and supplier
development data. Having the ability to not only see all of this
data at a glance but also use it for follow-on processes can give
companies a significant advantage. With the help of digital tools in
SRM, companies can greatly increase efficiency and effectiveness
in their organizations.
A closer look at the results of the SRM Maturity Check also reveal
that primarily hybrid procurement organizations have implemented
an SRM solution (36%). This is due to the fact that the teams in
these organizations operate in different locations, which makes
directing and controlling processes in these organizations more
complex. Hybrid organizations have elements of both centralized
and decentralized structures. The best features of both are
combined to improve efficiency and the overall success of daily
operation. Digitalization improves cooperation between the
procurement center and the individual decentralized procurement
entities, increasing both agility and transparency.
KEY FINDINGS AND FORECASTS - AN OVERVIEW
< € 50 MILLION
IN REVENUE
62%OF COMPANIES
WITH > €500
MILLION REVENUE
USE A DIGITAL
SRM SOLUTION
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THE SRM MATURITY CHECK
GLOBAL SURVEY
The Global SRM Maturity Check was conducted in 2018 from
January 8th to April 8th. In total, 250 procurement specialists
from around the world participated. Professionals from Europe
(58%), the Americas (21%), Asia (16%), Africa (2%) and Australia
(3%) participated in the survey.
In order to gain a full picture of the state of supplier management
practices in companies around the world, specialists with
different roles and positions, ranging from buyers to CPOs
involved in both strategic and tactical sourcing, were asked to
participate. The participants represented a broad spectrum of
companies, company sizes, and industries.
21% AMERICA
58% EUROPE
16% ASIA
2% AFRICA
12
3
4
3% AUSTRALIA
4
The primary objective of the SRM Maturity Check was to find out
to what extent companies are already using digital solutions
in supplier management. It was important to determine which
strategies companies were already implementing and what kinds of
process optimization and savings opportunities there were. A further
objective was to find out if companies that are already using digital
SRM tools were able to achieve higher savings. Special attention was
paid to companies’ current requirements and how they compare to
the requirements listed in the SRM Maturity Check 2017. Do SRM
solutions have an effect on a company’s success or does it allow
SURVEY OBJECTIVES AND PARAMETERS
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INDUSTRIES
companies to discover hidden potential or savings opportunities?
This year’s survey focused more specifically on the suppliers, and
the benefits of SRM solutions and using preferred suppliers were
examined in more detail. Was there added value? If so, was it simply
in the form of reduced prices or was there also an effect on the
partnership between companies and their suppliers? How were
other company goals affected (risk monitoring, innovation…)?
The survey was based on a standardized questionnaire that covered
the core aspects of supplier management. The resulting data was
then used to analyze current procurement processes in more detail.
Companies of various sizes and from a wide range of branches
and industries were included in the study, regardless of whether
or not they already had an SRM solution in place. In addition to
establishing the importance of KPIs, the study also provides insights
into how digitalization can improve transparency and agility, and
reveals which companies and industries are already using supplier
management tools effectively.
Just under 80% of the participants were from the discrete
manufacturing and process manufacturing industries. The remaining
participants represented companies in banking and finance,
communications, and the insurance industry.
DEMOGRAPHICS
25 % Automoive
21 % Industrial manufacturing
10 % Energy, utilities & mining
10 % Metals
9 % Government and public services
6 % Aerospace, defense & security
3 % Banking & capital markets
3 % Chemicals
3 % Financial services
3 % Retail & consumer
3 % Technology
1% Communications
1 % Engineering & construction
1 % Entertainment & media
1 % Forest, paper & packaging
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The majority of the respondents (44%) work in companies with
more than 500 million euro in revenue. 23% of respondents work
in companies with between 50 and 499 million euro in revenue
and 33% work in companies with an annual revenue of less than 50
million euro.
43% of the companies surveyed indicated that their purchasing
volume was under 50 million euro per year, 35% had a purchasing
volume between 50-499 million euro per year, and 22% listed a
purchasing volume of more than 500 million euro per year.
REVENUE
PURCHASING VOLUME
> € 500 MILLION IN REVENUE
> € 50 - € 499 MILLION IN REVENUE
< € 50 MILLION IN REVENUE
44% 23% 33%
43% 35% 22%
> € 500 MILLION IN REVENUE
> € 50 - € 499 MILLION IN REVENUE
< € 50 MILLION IN REVENUE
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The results also show a strong correlation between a company’s
size and annual revenue and whether or not they already have an
SRM solution in place. Companies with an annual revenue of more
than 500 million euro, for instance, are five times more likely to have
an SRM solution than companies with less than 50 million euros in
revenue. Companies with between 50 and 499 million euros are
twice as likely to have an SRM solution.
The data reveals that more than 60% of the companies surveyed
already have global supplier management in place. Just 19% only
have locally-defined processes. 21% of participants had no specific
supplier management process in place.
SUPPLIER MANAGEMENT
IMPLEMENTATION OF SUPPLIER MANAGEMENT SOLUTION BY REVENUE
84% 60% 54%
GLOBAL SUPPLIER MANAGEMENT LOCAL SUPPLIER MANAGEMENT NO SUPPLIER MANAGEMENT
0%
10%
20%
30%
40%
50%
60%
70%
DIGITAL SRM SOLUTION IMPLEMENTED GLOBALLY24%
Implementation of an SRM solution No SRM solution
> € 500 MILLION IN REVENUE
> € 50 - € 499 MILLION IN REVENUE
< € 50 MILLION IN REVENUE
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SRM DEVELOPMENT FROM 2017 TO 2018
The day-to-day work experience in Procurement will change
more in the next five years that it has in the last 50. Unstable
economic and political conditions, a reduced real net output
ratio, globalization, and the continuous development of new
technologies are all pushing the digital transformation of
business processes and procedures forward at a rapid pace.
In the survey, participants were asked about the SRM solution
they were currently implementing. The results clearly show
that the size of the company (> 500 million euros in revenue)
is a significant factor in whether or not digital SRM solution is
already in place.
The following graph provides a detailed overview of the most
important results for SMEs and large companies. There are
considerable differences depending on the company’s size.
Larger companies have much more mature SRM processes
than SMEs and tend to lie above the market average. These
IF YOU ALWAYS DO WHAT YOU’VE
ALWAYS DONE, YOU WILL ALWAYS
GET WHAT YOU’VE ALWAYS GOT.Henry Ford
companies have been dealing with SRM-related issues
for longer due to the fact that these companies have more
complex supplier management requirements and processes.
These companies also work with and develop preferred
suppliers, and have employees who are specifically focused
on managing supplier data.
The main reason for this is that having a more complete
overview of KPIs also increases transparency. A further benefit
of digital SRM tools is that they provide a 360° overview of
global suppliers. Companies that have multiple international
locations have a greater need for SRM software solutions
because managing global suppliers and multiple ERP systems
OVERVIEW OF SRM BENCHMARKS
Revenue in million (€) Above 500m 50 to 499m lower than 50m Average
0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
1.6
1.8
2.0
2.2
Qu4 Qu5 Qu6 Qu7 Qu8 Qu9 Qu10 Qu11 Qu12 Qu13 AverageQuestions
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COMPANIES WITH A 360° VIEW
62% 23% 2%
1 Deloitte LLP.(2018): The Deloitte Global Chief Procurement Officer Survey 2018. Leadership: Driving innovation and delivering impact.London
DIGITAL SRM SOLUTION IN PLACE
ABOVE € 500M
0%
10%
20%
30%
40%
50%
60%
70%
2018 2017
€ 50 TO € 499 M LOWER THAN € 50M
can be a real challenge without the help of IT tools. As a result
of these complexities, larger companies have recognized the
advantages of SRM solutions and many are already using
SRM technology in their organizations. In large companies
especially, “digitalization” has become the buzzword that
everyone is talking about, because without it, KPIs can be
difficult to monitor, and analyzing the vast quantities of data
that companies are now able to collect can seem like a
daunting or even an impossible task without the assistance
of an IT tool. Without the ability to track and analyze data
effectively, it can be difficult to reduce costs, which, according
to the Deloitte Global Chief Procurement Officer Survey 20181,
is the top priority for 78% of procurement leaders this year.
With digitized KPIs and an integrated SRM solution, however,
more than 50% of the companies surveyed in the SRM Maturity
Check were able to cut costs.
Compared to the previous year, more companies are now
using digital SRM solutions. In the SRM survey from 2017, it was
also clear that large companies with more than 500 million
euro in annual revenue were more likely to have an SRM
solution. In 2018, companies with between 10 and 499 million
euro in revenue are following suit.
> € 500 MILLION IN REVENUE
> € 50 - € 499 MILLION IN REVENUE
< € 50 MILLION IN REVENUE
12
2 riskmethods GmbH (2017) Survey: Cost vs. Risk and the Evolving Role of Procurement
What are the benefits of implementing a digital SRM solution,
and what are the opportunities associated with having a full 360°
overview of your suppliers and KPIs? Not only do SRM solutions
increase transparency across the supply base, they also make it
easy to monitor and access important data from around the world.
Buyers and category managers always have the information they
need right at their fingertips. This makes it easier to implement
global supplier management and supplier development
strategies, which can significantly reduce operational costs in
Quality Management, logistics, and invoicing. By working together
with suppliers to optimize inefficient processes, companies can
also reduce the cost of materials.
Companies can save up to 3% on the cost of materials and up
to 10% on process costs by setting up a global database and
by introducing supplier development measures. This not only
eliminates duplicate entries in the supplier database, it also
reduces the number of claims and prevents supply shortages
by automating standard processes and by providing a clear
overview of all the most important procurement processes.
According to the riskmethods study, “BME Supply Chain Risk
Management 2017”2, 45% of companies experience between
1-5 disruptions each year. Every third supply chain disruption can
result in more than 1 million euro in damages, which is yet another
reason why more companies should focus on increasing agility
and transparency.
MORE TRANSPARENCY WITH A 360° VIEW
DESPITE THE POTENTIAL OF HIGH, UNEXPECTED
COSTS, MOST COMPANIES DO NOT MONITOR
RISK IN THEIR SUPPLY CHAIN AS CAREFULLY
AS THEY SHOULD. 81% BELIEVE THAT SUPPLY
CHAIN DISRUPTIONS ARE DIRECTLY CAUSED BY
SUPPLIERS, BUT IN REALITY, 41% OF DISRUPTIONS
ORIGINATE IN SUB-SUPPLIER STRUCTURES.
Heiko Schwarz, Founder and CEO, riskmethods.
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In addition to the results discussed above, the data also shows
that 85% (2017: 84%) of the companies surveyed already use
KPIs in their organizations. Of those that do use KPIs, 40% (2017:
34%) use KPIs that are both future-oriented and that focus on
past performance. Only 14% of these companies (2017: 11%) have
additional analytics capabilities with a 360° view. 15% of the
companies surveyed indicated that they do not use any KPIs in
their procurement organizations (Question 8).
Implementing a supplier management system provides
companies with an immediate overview of KPIs that indicate the
performance of individual suppliers, and can help Procurement
identify potential issues and threats early on. This can significantly
reduce the number of claims and prevent supply shortages.
Measuring supplier performance is a big part of KPIs. Many of the
survey participants indicated that it was important for them to be
able to define their own KPIs for this purpose so that they could
initiate corrective actions at different levels and at the right time.
58% collect supplier performance data but only at the local level,
and this information is usually not centrally available. This makes
it impossible to analyze the consolidated data, which centralized
procurement organizations are able to do with the help of a digital
SRM solution. Only 22% (2017: 18%) of the companies surveyed
have standardized KPIs throughout their entire organization and
can analyze the data in a consolidated dashboard (Question 9).
As part of the study, participants were also asked if and to what
extent their organization had supplier development processes
in place. 57% are actively engaged in the further development
of their suppliers, and half of these companies indicated that
their organizations had mature supplier development programs
throughout the entire organization. This shows an increase
from last year, where 19% said they had supplier development
programs.
The SRM Maturity Check shows that companies with a supplier
management system (usually involving a supplier development
process), achieve better savings. Companies that have a global
SRM system in place (as opposed to companies who only have
a supplier management system at the local level), are able to
achieve more than double the savings.
KPIs AND PERFORMANCE
85%OF COMPANIES
SURVEYED
ALREADY USE KPIS
58%COLLECT
SUPPLIER
PERFORMANCE
DATA
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USE OF SUPPLIER CLASSIFICATION IN PROCUREMENT AND ACHIEVED SAVINGS
USE OF KPIs IN PROCUREMENT
BOTH DESCRIPTIVE AND PREDICTIVE KPIS (DESCRIBING WHAT HAS HAPPENED AND WHAT WILL HAPPEN, E.G. FORECASTS ON
VOLUME, PRICES, ETC)
DESCRIPTIVE, PREDICTIVE AND 360° KPIS (DESCRIBING WHAT HAS HAPPENED,
WHAT WILL HAPPEN, AND ALSO INCLUDING RISK AND CSR DATA)
DESCRIPTIVE KPIS (DESCRIBING WHAT HAS HAPPENED IN SPEND, PPM, ETC)
NO KPIs
5%
10%
15%
20%
25%
30%
45%
35%
50%
40%
In the SRM Maturity Check, companies were also asked if they
classified their suppliers. Based on the responses, more than 72%
of the organizations surveyed have a supplier classification system.
While 17% of these companies are only able to classify suppliers
for less than 80% of the total spend, 26% (2017: 21%) of companies
are able to classify suppliers for more than 80% of the total spend,
thanks to the implementation of an SRM solution. The results offer
clear support for supplier classification. Companies can expect
to increase savings significantly as soon as an SRM solution is
implemented.
DOES SUPPLIER CLASSIFICATION MAKE SENSE?
29 % Yes, but information about a supplier‘s status is
not easily available and does not impact operational
activities
28 % No
26 % Yes, on more than 80% of the spend
17 % Yes, but on less than 80% of the spend
15%
2018 2017
UP TO 15% SAVINGS WITH
SUPPLIER CLASSIFICATION
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THE SUPPLIER: PARTNER OR TOOL?
To determine the maturity of SRM processes, it was important
to not only focus only on whether or not companies have SRM
solutions in place (and the state of the SRM solutions in use),
but also to examine the status of the supplier in the customer-
supplier relationship. Is the supplier seen primarily as a tool, or do
companies place more value on building long-term partnerships
with their suppliers?
To successfully build and develop a lasting partnership
with suppliers, good communication is key. This includes
communicating requirements, sharing information and
documents, and working together to optimize processes and
innovate. In most cases, when companies implement a supplier
network in their organization, it is to facilitate the exchange
of information between buyers and suppliers. However, the
survey results showed that not even half of the companies who
participated had a supplier network, and, due to the lack of an
SRM solution, only 8% had a platform for suppliers.
The study shows that 50% of companies expect the added
value gained from an SRM solution to be primarily in the form
of price reductions. For 9% of those surveyed, the growth of
the company was a significant factor in working together with
preferred suppliers. Companies that are not only focused on
price reductions in fact achieve the highest savings overall, with
a total savings of up to 26%.
VALUE OF SRM IN PROCUREMENT
26%
15%
11%
15%
SAVINGS
SAVINGS
SAVINGS
SAVINGS
SAVINGS
50 % Reducing prices
26 % Innovation
14 % Risk
9 % Growth
BY FOCUSING
ON GROWTHBY FOCUSING
ON RISK
BY FOCUSING ON
INNOVATION
BY FOCUSING ON
REDUCING PRICES
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3 https://www.theguardian.com/business/2016/aug/22/volkswagen-supplier-clash-stops-manufacturing-at-six-plants
HOW “CUSTOMERS OF CHOICE” APPROACH SUPPLIER MANAGEMENT
0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
1.6
1.8
2.0
2.2
15%COMPANIES SAVE
UP TO 15% BY
BUILDING BETTER
SUPPLIER
PARTNERSHIPS
This suggests that in order to maximize savings, companies
may want to widen their focus to include other aspects beyond
simply reducing prices. Many companies tend to ignore the
fact that focusing on growth, risk sharing, and innovation
automatically leads to long-term savings. If more value is placed
on improving supplier relationships, supply shortages and claims
can be avoided from the beginning. In this way, procurement
can cut costs without being dependent on price reductions from
suppliers.
The survey results reveal that 56% of companies with a hybrid
procurement organization and full ERP integration are often
named “customers of choice” by their suppliers. Working together
with suppliers as partners makes it easier to solve problems and
address issues before they become critical, which also helps
companies avoid unexpected costs.
As illustrated by the graph, companies that have a digital
SRM solution and use the solution and KPIs to qualify, classify,
evaluate, and develop suppliers, are more likely to be named a
customer of choice by suppliers. Having a “preferred” status has
advantages for both suppliers and for Procurement.
Without strong supplier relationships, companies are making
themselves more vulnerable to risk. The VW faux pas of 20163 is a
prime example of supplier relationship management gone wrong.
Production at VW was brought to a stand-still when two suppliers
halted deliveries. This quickly resulted in supply shortages,
Revenue in million (€) Above 500 50 to 499 lower than 50 Average
Qu4 Qu5 Qu6 Qu7 Qu8 Qu9 Qu10 Qu11 Qu12 Qu13 AverageQuestions
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SPEND WITH PREFERRED SUPPLIERS
Many companies choose to implement an SRM solution
primarily because they believe it will help them cut costs by
getting better prices from their suppliers. These companies
may be unaware of how digital SRM solutions can be used
to reduce costs in a range of other ways. Rather than relying
solely on uncomfortable negotiations, which can threaten a
company’s relationship with their suppliers over time, there are
other cost-cutting options available. The graph clearly shows
that for large companies in particular, 20% (and more) of the
preferred suppliers are responsible for 80% of the total spend,
which illustrates just how dependent these companies are on
their suppliers.
MORE THAN JUST A PRICE REDUCTION
More than 20% of suppliers represent 80% of the spend
20% of suppliers represent 80% of the spend
Less than 20% of suppliers represent 80% of the spend
Do not know or no target / KPI for that
This is why investing time on building better relationships with
suppliers is crucial, and has tangible benefits for companies and
suppliers alike. If companies choose to work with a digital SRM
tool, they can expect to save at least 30%, in part because of
the following factors:
• Time spent on supplier registration can be reduced by up
to 30%
• Supplier evaluations can be completed more quickly
• Contract management is easier and faster thanks to
digitalization
• Fully automated certificate management
• Easy to classify and qualify suppliers around the world
unexpected costs and unhappy customers. Cases like these are
not as rare as they should be, and the consequences can be
disastrous. This is why striving to be a customer of choice should
be a part of every company’s supplier relationship strategy;
companies with a “preferred” status with their suppliers save
more and get to reap the benefits of a positive and productive
partnership.
32%
40%15%
15%
36%
18%14%30% 24%
30%
14%
32%
> € 500 MILLION IN REVENUE
> € 50 - € 499 MILLION IN REVENUE
< € 50 MILLION IN REVENUE
18
One of the biggest gaps between SMEs and large companies
revealed in the SRM Maturity Check was in category
management. Category management is already a must-have in
larger companies because these companies need to define and
implement global strategies for decentralized and centralized
departments. Transparency is also especially important in an IT
environment with multiple ERP systems in order to avoid silos
and encourage synergy between departments, branches and
processes.
Even though large companies are ahead of SMEs, the survey
results indicate that there is room for improvement when it
comes to category management. Companies have made little
progress in the last year.
It is worth noting that, in general, companies with a category
strategy are able to achieve better savings because it is
largely consistent with the accompanying supplier strategy.
In total, 77% of the companies surveyed indicated that their
supplier strategy was based on their various categories. These
companies achieved higher savings than companies who did
not differentiate their suppliers according to categories. 70%
reported savings of up to 10%, 23% reported savings between
10% and 40%, and 7% even reported savings of higher than 50%.
Why is category management so important? The short answer
is that category management can help procurement achieve
success more quickly. By clustering sourced commodities,
AN OVERVIEW OF CATEGORY MANAGEMENT
0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
1.6
1.8
2.0
2.2Category
Management
77% BASE THEIR SUPPLIER
STRATEGIES ON
CATEGORIES
THE RIGHT STRATEGY FOR SUCCESS
Revenue in million (€) Above 500 50 to 499 lower than 50 Average
Qu4 Qu5 Qu6 Qu7 Qu8 Qu9 Qu10 Qu11 Qu12 Qu13 AverageQuestion
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a category manager or lead buyer can be assigned to a
specific category. The category manager is responsible for
setting requirements and strategies for a particular category,
and then sharing these with the procurement team, ensuring
that procurement processes and procedures are consistent
and standardized throughout an entire organization. Global
organizations usually roll out these strategies locally to reduce
costs and optimize categories and supplier portfolios.
Even though most companies expect reduced prices from
their suppliers, it is clear that they can achieve better savings
by focusing on growth, innovation and risk optimization when
working together with their suppliers. The results of the SRM
Maturity Check indicate that companies with more long-term
goals save between 15-26% on costs, whereas companies
whose sole focus is on reducing prices only achieve savings
of 11%. In light of this study, companies may want to consider
changing their priorities and reassess their approach to supplier
relationships.
WHAT GETS MEASURED
GETS MANAGED.
Peter F. Drucker
26%
UP TO 26% SAVINGS BY FOCUSING ON
GROWTH, RISK, OR INNOVATION
ONLY UP TO 11% SAVINGS BY
FOCUSING ON REDUCING PRICES
11%
SAVINGS BREAKDOWN BY PRIORITIES IN SUPPLIER RELATIONSHIP
20
CONCLUSION
Based on the results of this study, it is evident that there are
multiple factors beyond just reducing prices that should be
considered when selecting preferred suppliers. Taking a more
holistic approach that includes aspects such as growth, innovation,
and risk optimization can lead to more sustainable and stronger
long-term partnerships and, in turn, more savings. By digitalizing
supplier management, companies can save costs and also
increase transparency and agility throughout their organizations.
The 360° view provides a clear overview of supplier data and
overall supplier performance, which can help buyers react quickly
to unexpected situations. Digital SRM solutions make it easier to
minimize risk and prevent supply shortages, unexpected costs,
quality issues, and supply bottlenecks.
When creating a procurement strategy, it is important to consider
the company and its goals as a whole, because in most cases,
focusing on growth and innovation can have real benefits for
the company, such as more agile processes and better quality
products. All of this ultimately results in automatic savings. This
approach combined with digital tools can help companies reduce
manual processes, leaving Procurement with more resources that
can be redirected towards strengthening supplier relationships.
This can turn the focus of future negotiations to more than just
price reductions.
37%37% OF COMPANIES
REPORTED
LONG-TERM COST
REDUCTIONS
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SUPPLIER MANAGEMENT 2030
One of the most important goals in procurement has always been
to reduce costs. Costs can result from much more than complaints
and supply shortages. For example, changing suppliers can also
be very costly. To counteract these issues, many companies are
already using a digital SRM solution, which helps Procurement
track important data and react quickly to supply shortages and
avoid complaints. This is also confirmed in the Gartner study “Hype
Cycle Procurement and Sourcing Solutions, 2017.”4 In the future,
an all-in-one supplier platform will be an absolute necessity to
ensure transparency and communication between companies and
suppliers.
With the advent of Industry 4.0, more and more energy will be put
into avoiding disruptions, which can interfere with the complex
network both within and between companies. In addition to
orders from customers that automatically generate requirements
for suppliers, manufacturing equipment will communicate with
each other to optimize the manufacturing process. Logistics and
shipping processes will also be automated and controlled digitally,
which will allow companies to save their resources for other
tasks. Compliance with quality and delivery requirements will be
monitored continuously in automated supply chains. Procurement
will also need the help of intelligent systems to analyze the vast
amounts of data that companies will soon be able to collect. Artificial
intelligence and smart algorithms will also help procurement monitor
market developments, benchmarks, risk, and supplier KPIs. All
of these processes will need clean data to function, which is why
companies should start consolidating a clean master database
now. Big data and analytics have already surpassed what manual
processes are capable of, and are being used for forecasting and
to analyze events and disruptions around the world. Data analytics
can help companies react quickly to changes in prices for raw
materials, supply shortages, and quality developments, and can also
help Procurement make better decisions. Using this data for price
negotiations and in supplier development can reduce costs that go
far beyond reduced material prices.
The data from JAGGAER’s 2017 Digital Procurement Study5 shows
that companies are planning to invest in SRM or eSourcing tools
within the next 1-5 years. This is a sign that companies have
recognized the benefits of digitalization, and are aware that having
a complete overview of their supply base will help them operate
more effectively in nearly any situation.
PRIORITIES FOR INVESTMENT
4 Gartner Headquarters (2017): Hype Cycle Procurement and Sourcing Solutions, 2017. Stamford.5 JAGGAER Digital Procurement Survey 2017: Hype or new Standard
Learn more about digitalization in
Procurement. Download the JAGGAER
Digital Procurement Study “Just Hype
or the New Standard?”.
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%BIG DATA
ANALYSIS
DIGITAL
ASSISTANTS /
BOTS
ALGORITHMS /
SMART
WORKFLOWS
PREDICTIVE
ANALYTICS / KPI
RPA BLOCKCHAIN SRM-/eSOURCING-,
ePROCUREMENT
TOOLS
Already in use > 1 year > 3 years > years Not planned
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Disclaimer
The SRM Benchmark Survey 2018 and all therein contained assumptions and recommendations were based on the information from the online survey. Although the
greatest caution was exercised all information is provided without guarantee. In addition, the study is available in German. In case of any inconsistencies with the
English version, English version is to be prioritized.
The information contained in this document is proprietary. © 2018 JAGGAER. All Rights Reserved.
APENDIX: SRM QUESTIONS
ID Questions
1How much financial benefits has your organization delivered last year? (Expressed in % of your total external spend)
2What value do you expect your key/preferred suppliers to deliver? Please rank your priorities from 1 (most im-portant) to 4 (less important).
3 What percentage of your key/preferred suppliers do consider you as a customer of choice?
4 Do you have a central repository or database of suppliers?
5 Is there a formal qualification process and is it recognized across the organization? (Focus on direct only)
6Do you have a process to classify suppliers as: preferred (= expand business), active (= keep as it is), or disenga-ge (= phase-out) - or an equivalent system?
7 Do you have a list of your preferred suppliers that is shared, known, used, and easily available?
8 Which KPIs do you have / follow related to SRM?
9 Do you track KPIs related to supplier performance (defects and non-quality, on-time delivery, etc)
10 How much (%) of the spend is concentrated on key/preferred suppliers
11Do you have a process in place to promote suppliers, develop them, and recognize them (access to new pro-duct developments, awards…)
12 Are the SRM aspects detailed above tailored to each category? (definition, target…)
13Do you have dedicated Master Data Management (MDM) organization or dedicated roles with regards to supplier data?
14 Do you have a supplier portal or network?
jaggaer.com
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COMING TOGETHER IS A BEGINNING,
KEEPING TOGETHER IS PROGRESS,
WORKING TOGETHER IS SUCCESS.
Henry Ford
