When client and supplier see each other as irreplaceable – that’s where the magic happens!
What is Strategic Partner Management?
Every organisation has at least a hand full of Strategic Partners. These are key relationships the client has in order to deliver the very core of their business. Strategic Partner Management is all about friction-free sharing of information and includes the senior leadership of clients and suppliers to improve the ease of doing business, joint risk mitigation, joint cost reduction, mutually beneficial improvements and delivery of innovation.
How do I go about identifying Strategic Partners?
We recommend clients use the Kraljic Matrix (refer Figure 3) to identify if a supplier relationship is suitable to Strategic Partner Management. The importance here is also to consider the supplier’s perspective. Only if they consider the client’s business as Core to their own business will Strategic Partner Management be successful. Organisations who have successfully implemented Strategic Partner Management have invested significantly into those suppliers that fall into the ‘Strategic’ quadrant and they themselves fall into the ‘Core’ quadrant for the supplier. They have implemented detailed and active management, with significant effort in developing and nurturing the relationship across both organisations. They focus on initiatives which result in win/win, innovation, and joint cost reduction.
What benefits can organisations achieve from Strategic Partner Management?
- establishing sustainable, collaborative relationships with key suppliers, ensuring both parties improve their ability to plan, forecast and execute
- increasing supplier-led innovation and focusing on continuous improvement and value, which reduces costs and creates sustained savings for both parties
- reducing operational and supply risk exposure, which ultimately enables the client to obtain better operational and commercial outcomes.
Do many other organisations use Strategic Partner Management?
In our research, we have found that 69% of organisations have a strategic partner management program for at least some of their suppliers and that 82% of organisations manage less than 50% of their contracts through strategic partner management. This is probably based on the fact that, if done well, strategic partner management can only be applied to a handful of partners at the same time before diluting either the strategic importance of the relationship or the attention the client can give to establishing and maintaining the relationship.
73% of private sector participants have a strategic partner management program, with that number dropping to 63% for government organisations. Larger organisations (those with more than $500M procurement volume per annum) are more selective with their strategic partner management program. 86% of those that sit in the $500M to $1BN bracket manage less than 50% of their contracts through strategic partner management while none of the very big organisations above $1BN manage more than 10%.
Want to know more? Contact Stefan Gassner