Risks drive greater focus on supplier relationship management

Risk reduction in the supply chain is the primary business driver for increased investment in managing relationships across the supply chain.

The finding was detailed in London-based procurement and supply chain consultancy firm State of Flux’s annual report examining supplier relationship management (SRM) across the globe.

The report, published earlier this month surveyed more than 500 professionals at 425 businesses and found that risk and cost saving were the main reasons why businesses were increasing their focus on SRM.

Speaking after the publication of Six Pillars for Success, the firm’s chairman and founder Alan Day (pictured) said: “Supply chain risk has come to the fore so much especially over the past 12 months,” adding that businesses believe that SRM could improve risk management of the supply chain.

The report supports this notion, claiming that those taking the lead in SRM are reaping huge rewards compared with those considered as ‘followers’. Benefits include supply chain efficiency, impact on profit margins, and risk reduction.

Day commented: “Those that are doing [SRM] well are now getting more than double the benefit in terms of risk reduction as well as other benefits such as access to innovation compared with what we effectively call the ‘followers’.

“It makes sense that when you invest more you get more, but what the leaders are getting is a lot more.”

“Over five years, the gap has remained the same at best, but generally it has become wider between the leaders and the followers in terms of benefits.”