Building trust with suppliers

Building blocks to make your Supplier Relationship Management program a

success.
January 2024

Supplier Relationship Management (SRM) is a strategic function that should be aligned with the overall business
strategy and be the workhorse of value delivery.
Many organisations have hundreds, sometimes thousands of suppliers. How can they be sure that these relationships
are optimised and deliver the expected value? It is not uncommon for procurement functions to implement
standardised SRM Programs with a cookie cutter approach, however these are open to failure as they do not take into
account some of the fundamental principles underpinning a commercial and contractual relationship.

9 Challenges that may jeopardise your Supplier Relationship Management Program:

Absence of a SRM Framework Inadequate technology

Clear governance mechanisms and desired Active performance management, feedback, and
outcomes from your suppliers fosters equality and collaboration are vital for effective SRM. Having
removes bias between vendors, minimising disputes tools that automate some of the supplier delivery
and increasing focus on the ultimate organisational performance will greatly improve outcomes.
goals.
Lack of employee investment
Unclear SRM ownership Under-resourcing of the function by not investing
Clear ownership improves accountability and in headcounts. Inadequate motivational drivers
clarifies to suppliers how program of works will run, can lead to employee disengagement and
how value is delivered and how innovation & possible underperformance.
performance are measured.
Focus on savings
Prioritising savings over supplier development
and performance can hinder innovation,
Lack of supplier segmentation compromise relationships and impact trust.
Supplier segmentation increases visibility on who
has a major impact on your organisation and
whether there are alternative sources or not. Limited cross-functional collaboration
Isolating SRM from other departments can
hinder supplier capabilities and provide a limited
view of supplier performance.

One size fits all approach

Believing that all suppliers should be managed the Misplaced self-expectations
same can have detrimental impacts on the
business. For instance, a monopolistic supplier Believing that suppliers will pursue any business
should be managed differently to a leveraged opportunity with you and follow in your footsteps
supplier that has competitors. may lead to misplaced expectations and
disappointment.

©2024 KPMG, an Australian partnership and a member firm of the KPMG global organisation of independent member firms affiliated with KPMG
International Limited, a private English company limited by guarantee. All rights reserved. The KPMG name and logo are trademarks used under license by 1
the independent member firms of the KPMG global organisation.
Document Classification: KPMG Public
Liability limited by a scheme approved under Professional Standards Legislation.
Where are you in your SRM journey?
Eco systems & co-
creation
Strategic business objectives and
opportunities are addressed jointly.
Innovation is fostered in collaboration and
sometimes mutual funding. Relationship
forms an eco-system that delivers value
Trust
Additional value is driven
through trust and
partnerships can be formed.
Performance Supplier loyalty programs are
Comprehensive in place
performance development
framework has been
developed. Framework is
regularly communicated
and used to manage and
segment suppliers

Foundational
There is an existing relationship or contract.
Suppliers understand their expectations. No
performance reporting is visible

of globally surveyed supply chain

and procurement executives
indicated they had no visibility or
43% were ‘largely unclear’ about the
performance of their
Tier 1 suppliers.
Source: KPMG - the Future of Supply Chain 2023

of the Australasian respondents

declared they will change their
supply base in the next 3-5 years
70% and re-think their Supplier
Relationship Management.
Source: KPMG Future of Procurement survey 2023

©2024 KPMG, an Australian partnership and a member firm of the KPMG global organisation of independent member firms affiliated with KPMG
International Limited, a private English company limited by guarantee. All rights reserved. The KPMG name and logo are trademarks used under license by 2
the independent member firms of the KPMG global organisation.
Document Classification: KPMG Public
Liability limited by a scheme approved under Professional Standards Legislation.
Major roadblocks to reaching SRM maturity
Many bumps along the road Fostering a culture of trust is the key
Establishing effective SRM can be challenging. The events of 2020-2021 highlighted organisations'
Whilst many organisations manage to elevate their reliance on supply chains. This led to a shift towards
maturity and reach Level 2 (Performance Stage), a collaboration, true partnerships, and creating value
large proportion fail at reaching Level 3 (Trust for stakeholders, rather than just cost savings.
Stage). Suppliers and clients began to understand the
importance of establishing mutual trust, whether it
According to Forbes - Procurement Leaders’ CPOs
be: trust to keep the lights on; trust in the clients’
insights 2017, only 51% of collaboration efforts
intention to pay; and trust in suppliers’ intention to
succeed when a SRM Programs is in place and a
deliver on time and at the expected quality and
large proportion fail within the first 6 months of
price.
implementation.
Trust is a difficult equation that harnesses the SRM
To overcome these challenges, organisations need
value drivers and can only yield sustainable results
to develop a well-defined SRM strategy, secure
when the following two fundamentals are in place:
executive support, invest in resources and
technology, and foster a culture of collaboration 1. Performance, reliability & consistency from the
and continuous improvement. supplier
2. Clear & realistic expectations and transparency
from the buyer

51% of the collaborations are successful when a SRM Program is in place.

Source: Forbes – Procurement Leaders CPOs insights - 2017

Supplier Relationship Management Value Drivers

Current
Engagements Risk Management
Contract performance Supply chain resilience
Client Experience
& business continuity Seamless service
assurance delivery

Commercial
Reduced costs, cost
avoidance, cash flow
optimisation etc

Social Responsibility
Innovation Sustainability, Frist Nations
programs, social equity etc
Co-creation, joint solution design,
collaborative development.
Value drivers that are
enabled through
established mutual trust

©2024 KPMG, an Australian partnership and a member firm of the KPMG global organisation of independent member firms affiliated with KPMG
International Limited, a private English company limited by guarantee. All rights reserved. The KPMG name and logo are trademarks used under license by 3
the independent member firms of the KPMG global organisation.
Document Classification: KPMG Public
Liability limited by a scheme approved under Professional Standards Legislation.
Build trust to deliver value through your SRM
program
Ensure mutual interest
Organisations often assume that suppliers are desperate for their business. In reality, most of them carefully
select the clients they want to work with and the opportunity they will pursue. By having a focus on
organisations that align with your goals and needs, you increase the likelihood of securing trustworthy and
committed suppliers who will be confident in the synergetic outcomes that may be achieved.

Take ownership and responsibility

Taking ownership and responsibility for your actions and decisions and admitting mistakes when they occur
shows that you are accountable and can be trusted to rectify errors. This approach anchors trust as your
partners grow their confidence to commit effort and invest in the relationship.

Show transparency and empathy

Being open and transparent about your intentions, motivations, and decision-making processes helps others
understand your actions and builds trust. Showing empathy and understanding towards others' perspectives,
feelings and needs creates a sense of emotional connection, amplifying your message and opening new
opportunities.

Understand your future partner’s capabilities

Assessing your future partner’s capabilities to fulfill their commitments is a critical aspect of effective
procurement. It's vital to evaluate if prospective suppliers understand your organisation's requirements and
possess the required resources to meet contractual obligations. Most suppliers will take pride in demonstrating
their capability by inviting you for a site visit and will appreciate your intellectual curiosity.

Invest in the SRM program to nurture that trust

Securing a budget to have adequate resources to work on the relationship is paramount.

Trust forms the backbone of successful supplier relationships in procurement and its deficiency is often a result of
limited SRM programs. Procurement professionals who can foster trust and attract committed suppliers will achieve
better outcomes. KPMG’s SRM methodology, global insights and direct client experience can help
organisations accelerate their SRM journey, ultimately delivering sustainable value.

Contact
Us

Samantha Durban Nic Hillier Anthony Petit Chris Clements

Partner– Sourcing and Principal Director – Director – Sourcing and Partner– Sourcing and
Procurement Advisory Sourcing and Procurement Advisory Procurement Advisory
Procurement Advisory
Tel +61 3 9838 4470 Tel +61 3 8663 8284 Tel +61 9455 9519
[email protected] Tel +61 2 9335 8530 [email protected] [email protected]
[email protected]

©2024 KPMG, an Australian partnership and a member firm of the KPMG global organisation of independent member firms affiliated with KPMG
International Limited, a private English company limited by guarantee. All rights reserved. The KPMG name and logo are trademarks used under license by 4
the independent member firms of the KPMG global organisation.
Document Classification: KPMG Public
Liability limited by a scheme approved under Professional Standards Legislation.