A GUIDE TO STRATEGIC

SUPPLIER RELATIONSHIP MANAGEMENT

PART 3. WHAT IS SSRM?

More information and materials on the broader topic of SSRM including why it’s so important for Government, global insights on best practice and some key enablers for long term success

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CONTENTS FOREWORD ______3 POLICY STATEMENT ______3 ABOUT THIS GUIDE ______4 1.0 Introduction ______5 1.1 What are strategic supplier relationships and why are they important? ______5 1.2 What is strategic supplier relationship management? ______6 1.3 Why SSRM? - A view from outside Government ______8 2.0 What does good SSRM look like? ______10 3.0 Feedback ______25

GCF SSRM Guidelines – Part 3. What is SSRM?

FOREWORD

Working with our strategic suppliers more collaboratively is an essential part of improving commercial outcomes across government.

By adopting the approach set out in this guidance we will together be better able to unlock innovation and improvement, as well as more rapidly address areas that may not be meeting their full potential. This document has been developed with the support of Government Departments as well as external subject matter experts including Strategic Partnering and State of Flux.

The approach taken builds on the helpful insights provided by both the National Audit Office and the International Association of Contract and Commercial Management and supports the aspirations we set out in the Commercial Operating Standards, particularly -Standard 8: Supplier Relationships.

I look forward to working with Departments and suppliers to implement this guidance and enhance our commercial outcomes through improved strategic supplier relationship management; taxpayers expect us to deliver value for money and this approach is a key part of delivering just that.

Gareth Rhys Williams

Chief Commercial Officer

Date: …………………..

POLICY STATEMENT

The over-riding requirement in public procurement is getting value for money. As well as being subject to a legal framework, public procurement policy is closely aligned to Government priorities; these policies determine how the public sector should interact and contract with suppliers across a wide range of issues, and set out best practice advice and guidance.

Government is committed to forming good relationships with its Strategic Suppliers. Long term relationships can be difficult to establish and maintain in an environment where contracts are typically time-limited, but there are significant benefits to be gained on both sides for developing productive and enduring supplier relationships. Working together in this way with our suppliers builds trust, develops mutual understanding, improves service delivery and helps to solve problems more effectively. Ultimately delivering more value to the taxpayer.

Those engaged in public procurement should use this guide to develop and strengthen their relationships with suppliers, whilst being mindful of the parameters of the public procurement legal framework, policy and specific contractual arrangements, seeking professional advice where necessary.

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GCF SSRM Guidelines – Part 3. What is SSRM?

ABOUT THIS GUIDE

This guide has been developed by the Government Commercial Function with the support of a Steering Group made up of representatives from Government Departments. It draws on acknowledged global best practice both in terms of Strategic Supplier Relationship Management (SSRM) and its implementation.

This guide is arranged into three parts as described below. Parts 1 & 2 include links to a range of supporting tools and templates.

PART 1. GETTING STARTED

Guidance for Department SSRM Programme Managers

This section covers the SSRM programme level activities including appointments and structures required to create a consistent Department approach to setting up SSRM to be implemented at supplier level. This section includes best practice and guidance along with a number of tools and templates.

PART 2. WORKING WITH SUPPLIERS

Guidance for Relationship Leads

This section covers the activities recommended to be undertaken with each Department strategic supplier in order to set up and implement an effective and sustainable SSRM approach to deliver value. This section includes best practice and guidance along with a number of tools and templates.

PART 3. WHAT IS SSRM?

More information and materials on the broader topic of SSRM including why it’s so important for Government, global insights on best practice and some key enablers for long term success. This section may contain information and examples that will be useful to share with key stakeholders as part of a communication and engagement strategy.

TOOLS

Supporting tools are embedded throughout this document adjacent to the relevant section in the guide.

If you have any feedback questions on the content or use of this guide please contact: Steve Duckworth, Head of Supplier Relationship Management, Cabinet Office.

[email protected]

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GCF SSRM Guidelines – Part 3. What is SSRM?

1.0 Introduction

1.1 What are strategic supplier relationships and why are they important?

What does the term ‘Strategic Supplier’ really mean? Strategic suppliers, and therefore by definition strategic supplier relationships, are those that meet a set of criteria that combines level of spend, risk, scope, alignment, duration and the potential for the relationship to deliver more value. It is potential to deliver more value that in most cases differentiates between strategic and critical suppliers. A supplier’s criticality is determined by the product or service they provide. However, to be regarded as strategic a supplier will need to demonstrate attributes that include an appetite to collaborate and create a joint strategy.

Strategic suppliers should be expected to contribute more than just performance on a day to day basis but should also be contributing more to supporting Departments current and future goals and objectives.

Government has already addressed the topic of developing improved strategic supplier relationship management in the Government Commercial Operating Standards.

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GCF SSRM Guidelines – Part 3. What is SSRM?

1.2 What is strategic supplier relationship management?

For Government, Strategic Supplier Relationship Management is defined as:

“Practices and behaviours adopted to engage more collaboratively with strategic suppliers to improve delivery of Government objectives and increase mutual value beyond that originally contracted”

It differs from other forms of supplier management in that it places additional emphasis on developing a more collaborative approach where typically more information will be shared by both parties. In addition to exemplary delivery of services as currently contracted suppliers will be expected to work with Departments to create additional value.

SSRM cannot hope to be successful in isolation. It needs to be part of a holistic approach to supplier management that extends across the whole procurement lifecycle. During this cycle, activities are progressively layered to create a fully integrated and connected approach to interactions with the supply market and suppliers. The following model (Fig 1) illustrates the relationship between each of the key elements that make up the procurement lifecycle and emphasises the information flow, the connections and necessary continuity.

Fig 1. The Procurement Lifecycle

Each of these important elements of the Procurement Lifecycle and their interconnectedness are further described below:

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GCF SSRM Guidelines – Part 3. What is SSRM?

Strategic Supplier Relationship Management  Value creation beyond that originally contracted  Managed engagement at an executive level  Joint strategy development, objectives and planning  Collaborative behaviours and working  Management of aggregated performance and risk

 Relies on robust risk, contract and performance management How is it connected?  Facilitates improved risk, contract and performance management  Informs category strategies

Supplier Performance Management

 Service / product implementation  Operational performance reporting  Supplier performance management via SLA’s and KPI’s

 Managing problem solving and corrective actions  Driving operational continuous improvement

 Relies on contract creation and risk assessment How is it connected?  Informs strategic supplier relationship management

Contract Management  Contract creation and execution  Managing contractual obligations and terms  Managing contract and operational change

 Managing contract renewal / termination and exit

How is it connected?  Relies on risk assessment and contract negotiation  Informs, performance management and SSRM

Risk Management  Market and supplier risk assessment  Risk mitigation and residual risk sign off  Ongoing risk review and reduction

How is it connected?  Relies on risk information gathered during the category management and strategic sourcing process.  Informs contract creation and negotiation, performance management and strategic supplier relationship management

Category Management  Category analysis and planning

 Category strategy & strategic sourcing  Contract negotiation

How is it connected?  Relies on good market and supplier intelligence that can be acquired via relationships with current strategic suppliers.  Informs ongoing risk and contract management

Please note: The Government Commercial Function definition of Contract Management includes Performance Management, Contract Management and Risk Management.

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1.3 Why SSRM? - A view from outside Government

Customer / Supplier market dynamics have changed

The advent of category management has meant that the sourcing solutions, including large scale outsourcing and the rationalisation of supplier bases, has resulted in more dependency and risk in contracts and supplier relationships that are locked in for multiple years. This means that potentially suppliers now have more bargaining power and consequently the bargaining power of buyers is reduced as a result of increased dependency on suppliers and the cost and risk of change. While in some areas the barriers and cost of entry to the market have increased thereby reducing the likelihood of new entrants, in others the barriers have come down and new entrants are disrupting traditional markets. The need to scale up to meet demand has meant that markets have consolidated with players swallowed up through mergers and acquisition or forced out of the market. While technology will continue to offer substitution potential in some markets, this technology development is often funded and controlled by the incumbents and will be rationed in such a way that market position and revenues are protected.

So, while opportunities still exist to drive more savings through market and spend leverage, these are diminishing and therefore simple pursuit of lowest price increases the risk of negative impact on service, quality and reputation is increasing. Organisations are now seeking ways to maximise the value from their rationalised supply base and generally more strategic supplier relationships.

The transition from sourcing to SSRM

Commercial functions have been on a journey for many years. The journey has seen their role grow from largely transactional and administrative, ‘the buying office’, to performing a far more strategic role. They are now more frequently regarded as the external market and supplier experts supporting the business to make the right strategic decisions and then managing a professional procurement process and delivering year on year savings. To some extent Commercial have become victims of their own success and expectations of continued savings irrespective of the diminishing opportunities to achieve these through sourcing strategies and negotiation alone. This has driven the increased realisation that SSRM is the next evolutionary next step for the Commercial discipline.

Fig 2. The transition from sourcing to SSRM

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What happens to contract value?

Another take on the evolving role of procurement and the transition from sourcing to SSRM is what has traditionally happened to the value that organisations believed they were securing in their contracts. Every time a contract lifecycle is nearing completion the work begins to secure more value in the new contract than in the last. This activity has evolved from simply trying to drive a better deal to working more closely with the business to define requirements that achieve better outcomes at lower cost and then taking these to market via comprehensive category strategies and effective strategic sourcing. Nonetheless, extensive research over a number of years (CIPS, Aberdeen Group, CEB et al) has revealed that anything between 30% and 70% of that anticipated incremental value is not delivered. The reason for this is clear. An absence of effective and efficient management of the contract, performance and risk. Deploying these tools effectively is the only way that contracts can realistically be expected to deliver their anticipated, and in many cases ‘banked’ value.

The model below illustrates the scenarios that can play out.

Fig 3. What happens to contract value?

LOST VALUE – In some cases the cut and thrust of a contract negotiation gets the better of common sense on both sides. A combination of ‘overzealous’ negotiation on the buy side combines with pressure to close the deal on the sell side results in pricing or service levels that are not sustainable. Very quickly the value leaks away and in some cases the relationship is damaged.

BAU VALUE – When effective and efficient contract, risk and performance management is implemented the chance of delivering the anticipated contract value is greatly enhanced.

INCREMENTAL VALUE – When the foundations of good supplier management are in place it will be possible to focus more on developing relationships with strategic suppliers that can identify and deliver value that goes beyond what was originally contracted. This is achieved through genuine partnership and collaboration tapping into the true capability of the supplier.

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2.0 What does good SSRM look like?

Good SSRM requires a number of interconnected elements to be developed that when combined will result in organisations reaching a place where SSRM is no longer regarded as a programme or an initiative but is simply “the way we work with suppliers”. The key process, people and technology enablers will be embedded and working collaboratively and efficiently with key suppliers. This guide takes a model developed by State of Flux1 to describe what these elements are and how they are connected and interdependent when striving to implement and maintain effective SSRM.

Fig 4. The six pillars of SSRM

© State of Flux 2017

1 State of Flux are a procurement and supply chain consultancy specialising in SSRM

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GCF SSRM Guidelines – Part 3. What is SSRM?

The six pillars and what they represent is described in more detail below:

 Each Department has a clear value proposition for SSRM that resonates with all stakeholders.  The SSRM value proposition for each key supplier and a strategy to deliver it has been developed and

implemented.

 SSRM programmes are driving incremental measurable value (service, cost and risk) beyond that originally contracted.  Departments can demonstrate through metrics or case studies the incremental value being delivered.  Where appropriate incremental value created is shared with suppliers.

What is the SSRM value proposition for Government?

SSRM offers the potential to create and deliver value that extends across almost every activity and function of an organisation. Listed below are examples of SSRM value propositions that can be approached from a collaborative SSRM perspective and how these can manifest themselves in relationships with strategic suppliers and result in more effective and efficient implementation of Department policy and strategic objectives.

Contract, performance and risk optimisation Contract, performance and risk optimisation is consciously placed first in this list of potential SSRM value opportunities. The first step in establishing a relationship that will create value beyond that already contracted is to ensure that the value delivered from the current contract is being delivered. This will not only deliver that value (which might not have been realised since the contract was implemented) but it will also establish the credibility of SSRM and help gain more stakeholder support.

Supplier innovation While historically regarded as more of an opportunity in the private sector for companies to leverage supplier innovation to develop new products or solutions and gain commercial advantage, supplier innovation can be just as valuable in the public sector. Suppliers are experts in service design and delivery. They rarely work just in the public sector so their wider customer exposure, market insights and expertise should be better leveraged by Government. Value here might be radical departures from traditional service delivery or the introduction of disruptive solutions or technology.

Policy, strategy and market alignment Policy and strategic objectives can sometimes be constrained by the ‘known world’. Gaining greater insights in to the capability of the market via more open and transparent dialogue with suppliers could lead to better policy decisions.

Customer of choice. A customer of choice is one that via its behaviours and processes and increasingly its use of technology consistently positions itself to benefit and gain competitive and commercial advantage from the discretionary choices made by its suppliers. The way in which suppliers treat their customers is only partly dictated by the contract. To a large extent the supplier has the discretion to prefer one customer over another.

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This can be reflected in the senior management focus and attention the customer receives; the resource allocated to account management; the skills and capability of people assigned to customer projects or service delivery; the allocation of scarce materials or resource when shortages occur; preferential pricing; the provision of support when required; general responsiveness and the willingness to go the extra mile. Evidence suggests that customer of choice status is less influenced over the long term by revenue and profitability than it is by relationship that exists beyond the mutual contract obligations and by ease of doing business.

Cost reduction Cost reduction in the context of SSRM should focus on reducing ‘bad cost’. This refers to waste and inefficiency in all aspects of both the direct and indirect cost of products and services. By working with suppliers more collaboratively and with increasing levels of trust, openness and transparency it should be possible to identify areas where genuine cost can be reduced that will be reflected in both unit price reduction and cost of doing business. It should be noted that within an SSRM approach there is still room for commercial negotiation but this should be conducted responsibly and recognising the need for the business and relationship to be sustainable. We wouldn’t expect a cost reduction discussion in the context of SSRM to focus only on market competition or reducing supplier margins.

Cost avoidance Cost avoidance has long been debated in procurement, commercial and finance circles as to whether it should be regarded and indeed measured as a genuine benefit to an organisation. SSRM rekindles this debate as it recognises the negative impact on relationships that a failure to seriously address genuine cost increases can have and therefore the value of addressing it collaboratively with suppliers. The value will manifest itself in the general relationship, being regarded as a customer of choice (if for no more than being willing to discuss the topic rather than hide behand a contract ‘no price change clause’) and avoiding disputes.

Speed to market Benefits from accelerating speed to market in the private sector is self-evident. In the public sector there are also obvious benefits from being able to reduce the time it takes to implement policy and services or changes and thereby see the benefits sooner.

Transactional efficiency and ease of doing business Advantages of improving transactional efficiency are clear in terms of cost and time. However, transactional efficiency is also an important element in becoming easier to do business with and therefore more likely to be a customer of choice. In many cases transactions such as ordering and payment are hygiene factors in relationships that if left unaddressed will over time undermine the relationship and the areas of greater value that it should be able to achieve.

Risk reduction Risk management should feature at all stages of the procurement life cycle from risk assessment when developing sourcing strategies to risk mitigation as part of the supplier selection and contracting phase. Beyond this risk management tends to be focused on monitoring residual risk and responding to any changes. By working more collaboratively with suppliers it should be possible to better monitor and anticipate changes to risk profiles and develop joint mitigation strategies.

Enhanced service strategies. It should be acknowledged that some suppliers are experts in service development and delivery. Taking full advantage of this will enable Departments to benefit from the latest thinking and cross sector experience to develop optimum service strategies.

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Sustainability. Working closer with suppliers on this topic is to better understand and mitigate risk exposure and to drive improvement thereby enabling Government to achieve its policy objectives in a way that is consistent with its own social and environmental agenda. As well the human and environment impact of failures in this area the reputational risk to Government Departments is significant.

Negotiation outcomes Evidence has been gathered suggesting that SSRM far from having a detrimental effect on negotiation outcomes by abandoning traditional approaches, SSRM actually helps achieve better outcomes for both parties, reduced time spent negotiating, less involvement of legal, more responsible allocation of risk, more outcomes perceived as win:win.

Supply chain efficiency While not as easy to identify, services too have supply chains that reach back to second tier suppliers and beyond. Each step in these supply chains has a required set on inputs and outputs that serve to optimise supply. Strategic suppliers to Government are likely to have long and complex supply chains, by working more closely with suppliers these supply chains can be de-risked and optimised.

Issue resolution Millions of hours and multi millions of pounds are expended every year in the protracted resolution of issues that arise between organisations. These can also easily escalate into costly litigation and result in the irretrievable breakdown of relationships. Creating the structures and adopting the behaviours to address and resolve these issues quicker and more equitably will be of significant benefit to both parties.

Note: This list is not exhaustive

Measuring value The value proposition predicts the ways in which value can be created via more collaborative and effective management of strategic supplier relationships should serve as the most important vehicle to engage stakeholders and win support for the programme. However, this support will be short lived unless real and measurable value is delivered. Departments will need to develop effective and efficient ways of capturing and reporting both direct financial benefits. Typically direct financial benefits are validated by Business Areas and Finance. For indirect benefits the recommended approach is to document clear and concise case studies that are validated by impacted Business Areas.

Sharing value The focus of SSRM is on collaboration. To create this joint enterprise it is essential that both parties are incentivised and motivated. Departments need to identify ways in which the effort and contribution of suppliers is recognised and rewarded. Examples of best practice in this area range from direct financial recognition, to supplier awards and favourable publicity. It will be the responsibility of Departments to decide how this should be managed and that any arrangements are compliant with Public Contracts Regulations.

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 Senior stakeholders in Departments (outside of the Commercial function) are strong and active

supporters of SSRM.  Operational staff and service users understand SSRM and are part of the change process.  Strategic suppliers are engaged and enthusiastic participants in SSRM.

 Stakeholder management plans are activated for all stakeholder groups.

While SSRM is most often initiated by the Commercial function it can never be truly successful unless it is adopted as a business wide way of working. Obtaining strong and active engagement and support from a wide range of stakeholders is vital to its success and the delivery of value. Stakeholders fall largely into three groups. The first group are senior managers and executives across all areas of the Department that have interactions with suppliers. The strong and active engagement required will manifest itself in several ways:

Genuine understanding and buy in – they will be able to articulate the value of SSRM. Real support – they will allocate budget and resources. Personal commitment – they will be actively engaged with supplier senior executives and commit time to attend relevant meetings. Advocacy – they will be advocates of SSRM both within their Departments and with peers. Role models – they will act as role models by consistently working and behaving more collaboratively with strategic suppliers.

The second group are business and operational colleagues. Likewise, this group are spread across the organisation and will most likely have daily interactions with suppliers. Their strong and active engagement will look like:

Genuine understanding and buy in – they will be able to articulate the value of SSRM. Real support – they will be enthusiastic members of the wider strategic supplier relationship management team, playing an active part and accepting their roles and responsibilities. Behaviours and ways of working – they will adopt the necessary behaviours and ways of working to get the best out of collaboration with strategic suppliers. Advocacy – they will be advocates of SSRM both within their Departments and with peers.

The third group of key stakeholders are strategic suppliers. For relationships to work it is essential that both parties are aligned and committed to success. Strong and active engagement from strategic suppliers will be evident from:

Genuine understanding and buy in – both at an executive and operational level they will be able to articulate the value of SSRM. Real support – they will allocate sufficient time and resource to support more collaboration and SSRM initiatives and their related work streams. Personal commitment - they will be actively engaged with Departments and commit time to attending relevant meetings and driving value through initiatives and work streams. Advocacy – they will be advocates of SSRM both within their Departments and with peers. Role models – they will act as role models by consistently working and behaving more collaboratively with strategic suppliers.

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 Suppliers have been segmented using an objective and structured approach and those deemed strategic are part of the Department SSRM programme.  All strategic suppliers have been identified and an appropriate treatment strategy agreed.  Roles and responsibilities have been defined.  Effective and efficient engagement and governance models are in place to facilitate appropriate management control of strategic relationships reducing risk, improving performance and driving value.  MI and reporting are driving corrective actions and continuous improvement.  A schedule of regular meetings are in place that are effective and efficient in exercising oversight, relationship management and driving value.

Governance is the means (persons, committees or Departments) by which appropriate management control and authority is exercised over something. In this case the management of relationships with strategic suppliers to Government Departments. Within this context good governance incorporates the following key elements:

Supplier segmentation – not all supplier relationships require the same level of governance. Appropriate governance is determined by applying a structured and objective segmentation process that differentiates between suppliers based on consideration of key factors such as spend, risk, business criticality, scope to innovate and create incremental value, strategic alignment and willingness to collaborate. Supplier segmentation is the process whereby each Department can determine which of its suppliers are the most critical to achieving Departmental objectives. Clearly those suppliers and relationships that are more critical will require more attention and resource. This is to ensure they not only deliver the requisite service but also drive value through cost, service and risk that is beyond what is already contracted. In addition, these truly strategic supplier relationships need to be more aligned to Departments and share joint strategic objectives. Segmentation is an objective process to apply a range of weighted decision making criteria against each supplier to determine both operational criticality and strategic importance.

Why is supplier segmentation important? - supplier segmentation is important for a number of reasons:

Value – not all suppliers can or need to be managed in the same way. Segmentation will align suppliers to treatment strategies that are designed to optimise the value derived from each supplier relationship.

Risk – segmentation will support improved risk management by revealing the current risk profile of suppliers and supply markets.

Resources – Resources will always be finite so it’s therefore imperative that they are optimised both in terms of their capability and allocation. Segmentation will align suppliers to defined treatment strategies and inform resource requirement and allocation discussions.

Supplier and market intelligence – the questions raised during the segmentation process will help develop a better understanding of suppliers, their relationships with Government and the inherent risks and opportunities associated with their market sectors.

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Governance – good governance and in some cases regulatory compliance requires there to be a set of rules for governing supplier relationships. These rules will differ according to criticality and strategic importance of suppliers. The application of a particular set of rules to an individual supplier will be guided by the output from the supplier segmentation exercise.

Consistency – segmentation will enable suppliers to be identified according to their segmentation and managed consistently.

SSRM treatment strategies – applying appropriate governance is only part of the interactions that take place with suppliers that differ according to their segmentation. The term ‘treatment strategies’ refers to a range of differentiated supplier management activities (e.g. performance, contract and risk management, financial due diligence, continuous improvement and innovation etc.) undertaken with suppliers that correspond to how they have been segmented.

Organisations usually define three or four levels of segmentation with a wider and more intensive range of activities the more critical or strategic the supplier is deemed to be. For the purposes of this guide we have illustrated the recommended treatment strategies that align to the Departments most strategic suppliers. It is anticipated that Departments will adopt a range of less stringent activities for suppliers ranked lower than strategic. These should continue to be compliant with individual Department supplier and contract management procedures.

Fig. 6 Segmentation model

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Fig 7. Treatment strategies

Roles and responsibilities - clarity in terms of role and responsibilities is vital in any relationship but even more so in complex strategic supplier relationships often spanning multiple business areas within the Department and sometimes cross Government. By their nature relationships with strategic suppliers are complex and involve many different players. For SSRM to be successful it is important to clearly define the roles and responsibilities and the key interactions of these players. The role descriptions contained in this guide are indicative

Governance models – assigns responsibility for operational contract, performance and risk management to Department business areas and their counterparts in the supply side organisation. The development of a strategy for the relationship and its delivery is the responsibility of the Relationship Lead working with the supply side Key Account Manager. Department business and operational stakeholders and supplier service delivery personal will be a vital part of delivering the SSRM initiatives and work streams that will improve multiple aspects of the relationship and deliver value. It is recommended that each strategic supplier relationship has an Accountable Executive appointed whose responsibility it is to agree the strategy with an equivalent supply side executive. Key to the success of this engagement model is not just the ‘horizontal’ interactions and relationships between the Department and the supplier but also the internal interactions and communications within both organisations.

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Fig. 8 Engagement model

The success of this engagement model depends on collaborative and flexible team working within the framework of a governance model with clear roles and responsibilities. This engagement model is designed to work across functional borders. While in the private sector the SSRM process is owned and largely executed by Commercial for around 70% of companies. Many companies – in particular the financial services sector – opt to manage relationships in the business areas with Commercial playing a supporting role.

Governance meetings - good governance needs to be both robust and efficient. To achieve this balance for strategic supplier relationships it is common for formal meeting structures to be established at three levels:

Strategic Relationship Operational

It is unlikely that for relationships as significant as those identified as strategic via the segmentation approach that no governance meetings are currently in place alongside the likelihood of ad-hoc meetings. Part of the design of the governance approach explained in more detail in PART 2. WORKING WITH SUPPLIERS covers the need to adapt existing governance meetings rather than create new meetings.

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Fig. 9 Governance meetings

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 Departments have defined the key SSRM roles.  The skills and competencies for the role are defined

 The skills and competencies of current staff have been assessed against the SSRM role requirement and development needs are understood at an individual and Department level.  High quality relevant training solutions are in place  SSRM practitioners in Departments are skilled and accomplished relationship managers.

The effective delivery of SSRM and the associated benefits depend heavily on the right combination of people, process and technology capability. All the evidence suggests that no matter how well designed processes are and how good the technology supporting them is neither will be fully effective without the people who come in to regular contact with suppliers changing the way they behave to create a more trusting and collaborative relationship. This applies equally to the supplier side as both parties will have been conditioned by years of working in a more traditional and potentially adversarial way.

The essential elements of an effective people development process:

The role (or roles) A lot of emphasis is placed on the role of the Relationship Lead as in many cases the new role as a focal point for managing the supplier relationship in a more strategic and holistic way. While this role is key, other important roles should not be forgotten. These include the Accountable Executive who will assume full accountability for the relationship and also other key contributors to the relationship including commercial and operations. Each of these roles need to understood and defined in order to create and effective team and operating model.

Relationship Lead This role is vital. Key responsibilities will include:

Delivering optimum value from designated supplier relationships; Pro-actively managing and developing relationships with designated suppliers within an agreed SRM process or framework; Creating and gaining buy in and approval of Joint Business Plans; Support and facilitate Accountable Executive relationship with designated supplier; Facilitating innovation and value creation; Evaluating and mitigating potential risks working in line with current regulatory and statutory requirements minimising impact to the business; Developing relationships with key business stakeholders; Reviewing aggregated performance to identify and act on adverse indicators or trends; Conducting regular contract reviews to assure ongoing alignment with business needs and work with relevant stakeholders to negotiate and agree required contract changes; Escalation point for performance and /or contract management issues; Provide leadership, develop, coach and motivate colleagues to create high performing SSRM teams of specialists to deliver business objectives;

Leading SSRM companies are increasing recognising the unique requirements of this role and designing into the organisation as a dedicated role, albeit often managing a portfolio of supplier relationships. Indicative Relationship Lead resourcing = 0.3 to 1.0 FTE per strategic supplier.

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Accountable Executive The most senior executive involved in the formal governance of the supplier relationship:

Accountable for establishing and maintaining a strategic agenda with a designated supplier; Responsible for sharing (or authorising the sharing) of corporate vision and strategy or other potentially sensitive information with designated supplier; Responsible for gaining senior buy in and approving single supplier Joint Business Plan; Final point of escalation for performance or commercial issues that cannot be resolved at operational or Relationship Lead level; Conduct periodic strategic reviews with a designated supplier and representing the organisations best interests; Be a champion and advocate of SRM;

Members of the extended SSRM team

Commercial Designated commercial specialist responsible for providing commercial and contracting support to the Relationship Lead. This element of their wider role should be clearly defined and included in their job description.

Operational Operational and service management personnel responsible for managing operational and service performance and providing data and insights to the Relationship Lead. This element of their wider role should be clearly defined and included in their job description.

Skills and competencies The skills and competencies required to successfully discharge the SSRM responsibilities tend to be grounded in strategic thinking, communication, building trust and influencing, cross functional working, commercial and facilitation. A skills and competency framework will identify the most important of these and identify the optimum level for the role.

Skills and competency assessment and training needs analysis The requisite skills and competencies are evaluated via a questionnaire that reveals where both individuals and teams have the most significant training needs.

Personal development plans and training solutions Organisations create personal development plans for individuals and explore a range of training solutions.

Personal objectives and performance management. SSRM should be included in personal objectives and performance management.

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 Information management, reporting and collaboration is fully enabled by technology in each Department.  Technology solutions in each Department are integrated and optimised.  Contract and Supplier Performance Management data is accurately managed and reported.  Data is accessible to those who need it and secure.

Technology, or the use of systems and data is a key enabler for effective SSRM. Given that a different technology landscape exists in each Department this guide will not include specifics in terms of which systems and data are to be used and when. Instead it will provide guidance on the key considerations for developing a department specific technology strategy for SSRM.

The procurement lifecycle is supported by many different technology solutions very few of which provide an end to end solution. In particular the post contract phase has traditionally been poorly served resulting in a technology landscape that is fragmented and often lacks the basic functionality to help manage supplier relationships effectively and efficiently.

As part of developing Department specific SRM programmes the creation of a supporting technology strategy is highly recommended.

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 Strategic relationships are characterised by trust, openness and mutuality.  Guiding principles for behaviours and working together have been agreed.  Specific initiatives supported by delivery work streams are in place to drive additional value (service, cost and risk) beyond that originally contracted.  Joint strategic objectives and plans are in place with strategic suppliers.  Each Department has defined its strategy and approach to harnessing appropriate innovation.  Relevant information is shared freely with strategic suppliers.  Departments are considered ‘customers of choice’ by key suppliers.

Collaboration differs from the other five pillars in that it can be regarded as an output of doing the other things really well. To a large extent this is correct, however, there are numerous other things that can be done to enable and promote more collaboration.

In the introduction to this guide, SSRM for Government is defined as:

“the practices and behaviours adopted to engage more collaboratively with strategic suppliers to improve delivery of Government policy and increase mutual value beyond that originally contracted”

Why is collaboration important? How supplier relationships are regarded in many organisations has not kept pace with the evolution of category management, strategic sourcing and the changed customer-supplier dynamic that has resulted. With both parties having so much more vested in the relationship it’s essential that the most strategic supplier relationships be regarded as more of a partnership and more collaborative relationships develop accordingly.

To achieve the aims and objectives of SSRM all parties will need to commit themselves to change. This change will partly be facilitated by new processes and working practices but by far the biggest challenge will be behavioural change. Specifying changed behaviours can be a challenge and often requires some guiding principles to be jointly agreed by the parties. These can be expressed in the form of guiding principles agreed by the parties as part of the mobilisation. A typical set of guiding principles might look like:

SSRM Guiding Principles

We will be professional and respectful in our dealings with one another at all times.

We will both work to the highest ethical standards and protect each other’s reputations.

We will avoid surprising one another by being open in our dealings, by basing our discussions on facts and providing relevant information to one another promptly.

Where tensions arise in the relationship, we will use these principles to ensure our behaviours do not deteriorate.

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We will improve our understanding of one-another’s expertise and capability and leverage our combined knowledge and expertise.

We will look for win-win outcomes in our overall relationship.

We will operate in an environment of mutual trust and act in good faith.

Collaboration cannot be forced. Even though some organisations try this by making collaboration a contractual obligation. It can only really be achieved successfully in a relationship that is open, transparent, and honest and based on trust.

Customer of Choice

In the same way that customers will invest time and effort in suppliers they know and trust supplier think the same way. Suppliers are much more likely to collaborate enthusiastically with customers they, trust and are easy to do business with. This is where the concept of ‘customer of choice’ differentiates between getting contract value out of a relationship and getting maximum value out of a relationship.

A customer of choice is:

“a company that through its processes and behaviours consistently positions itself to receive discretionary benefits from its relationships with key suppliers”

Voice of the Supplier research conducted by State of Flux in both the private and public sector has revealed that what suppliers value in their customers changes over time. During the business acquisition phase suppliers are anxious to win the sale, secure the revenue and be able to add the customers brand to their portfolio of clients. However, as time goes on these factors are less important – after all, they’ve been ‘chalked up’ and celebrated. What suppliers become increasingly interested in and start to value much more are attributes such as trustworthiness, transparency, long term partnership, communication etc. All attributes that are much more about relationship and ease of doing business.

Fig. 10 Sustaining Customer of Choice benefits

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3.0 Feedback

The guidance and practices set out in the guidance documents are based on current thinking and best practice examples. However, the topic of SSRM is always evolving. If you have any feedback, questions or suggestions on the content or use of this guide please contact: Steve Duckworth, Head of Supplier Relationship Management, Cabinet Office ([email protected]).

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