Unlocking Value from Your Strategic Suppliers: A Step-by-step Approach

The following is an edited extract from Supplier Relationship Management by Jonathan O'Brien.

To build an SCR with a supplier there is a five-step process that needs to be followed. Called the 5A process, it is applied to a single supplier with whom you wish to collaborate to achieve certain goals.

However, don’t be fooled into thinking it is a basic process. It is actually a comprehensive methodology which, by following the steps outlined below, will help you to secure the benefit that you are seeking from your strategic suppliers.

Stage 1: Activate

The first step in SCR is to determine what your company actually needs from its supply base. This, combined with the outputs from the segmentation process, will help you to define the aims and scope of the project.

To ‘activate’ the process you need to pull together a cross-functional team, typically comprising five to seven people, selected because of their involvement, interest or how they can contribute. You also need to select an overall executive sponsor to help galvanize the project.

The first tasks for the team will include:

Stage 2: Analyse

Stage two involves using many different tools and analyses to gather data and information to enable you to determine your Supplier Relationship Management (SRM) strategy.

The data and information mined from the various sources will help you form a picture of how you should move forward with the supplier. It is crucial that you consider what each individual step is telling you by continuously asking ‘so what does this tell us’ and capturing these insights. This will then help you move through stage three.

Stage 3: Ambition

The third stage is about defining your ambitions for the relationship.

Start by combining all you have learnt about the supplier to determine its positioning in the Supplier Preferencing and portfolio analysis tools. The output from both of these begins to suggest what your strategic direction might be and specifically if collaboration is not only feasible but also necessary.

At the end of this stage, you will have a final internal SRM strategy, with a roadmap and plan ready for the sponsor and key stakeholders to actively support and proceed on to the realization of the strategy with the supplier.

Stage 4: Accomplish

The second-to-last stage of the 5A process focuses on accomplishing the SRM strategy both internally and also with the supplier to help you realise your ambitions for the relationship.

Key to this is ensuring that all those involved internally or who have contact with the supplier are aware of and aligned with the agreed plans for this relationship including the measuring of KPIs, ongoing data collection analysis and other output arrangements needed.

Following this, full engagement with the supplier begins by agreeing a code of conduct and specific relationship aims, KPIs and scorecard and the improvement and development plans. You will need to agree on how you will work and interact with the supplier including how the relationship will be reviewed, how often, key roles and responsibilities and so on.

Stage 5: Advance

Once you have reached the final stage, you have moved into a phase of ongoing engagement and progression – in other words, ongoing advancement. Key to this is ensuring continuous joint working, resource sharing and interaction and progressing towards innovation projects.

Ultimately, it will be down to ongoing good project management and governance to ensure the relationship is kept front and centre by all concerned.