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The Supplier Management (SUM) capability aims to manage interactions between the IT function and its suppliers.

• Translate the sourcing strategy into supplier performance objectives and relationship management activities.
• Strike an appropriate balance between cost efficiency and supply/service quality.
• Foster collaboration, trust, empathy, open communication, and a desire for mutual benefit to encourage co-innovation with preferred suppliers.
• Ensure the integrity of supplier performance monitoring.
• Identify constraints and scope for manoeuvre when (re)negotiating supplier contracts.
• Use suppliers' expertise and innovation to support and inform the IT services' development roadmap.
• Engage proactively with suppliers to resolve incidents, problems, or poor performance.
• Manage supply risks across the portfolio of suppliers.

The Supplier Management (SUM) capability helps the IT function to build cooperative relationships with its suppliers, with a view to optimizing costs, creating shared value, and reducing supply-related risks.

After the IT sourcing strategy has been defined and the suppliers have been selected, the relationships with the suppliers have to be managed. Failure to manage these relationships can result in adversarial interactions with the suppliers. Managing them effectively can result in collaborative partnerships that reduce costs and risks, and create opportunities for joint innovation and value creation¹.

By developing a Supplier Management (SUM) capability, an organization can have an effective approach to supplier management in which individual behaviours and organizational practices are fair, open, and honest, so that the business and operational interests of both the organization and its suppliers mutually respect each other. Ultimately, the organization can build trust and create an environment in which the organization and its suppliers collaborate to their mutual benefit.

The Supplier Management (SUM) capability is the ability of the IT function to manage interactions with its suppliers in line with the sourcing strategy. The Supplier Management (SUM) capability covers:

• Developing relationships with suppliers to improve levels of performance, quality, and innovation.
• Managing risks associated with the organization's use of outside suppliers.
• Validating that suppliers' performance is in accordance with contract terms.
• Facilitating lines of communication with suppliers.
• Managing procurement activities with suppliers.
• Building two-way performance evaluation between the IT function and its suppliers.

Representative POMs are described for SUM at each level of maturity.

2Basic

• Practice

  Define the supplier engagement model to include, for example, contact points, escalation procedures, the frequency of operational and strategic planning and review meetings, and a description of roles and responsibilities.

  Outcome

  Interactions are more efficient, and problems and conflicts can be more easily resolved.

  Metric

  Percentage of supplier relationships managed using the defined supplier engagement model.

• Practice

  Implement processes for ensuring efficient interaction with suppliers on procurement, status tracking, fulfilment, and so on.

  Outcome

  The operational costs and errors associated with interacting with suppliers are reduced.

  Metric

  Percentage of suppliers following the defined processes.

• Practice

  Hold regular performance review meetings with suppliers — for example, in relation to service quality, change management, and incident and problem management.

  Outcomes

  • Better understanding of performance is promoted across both parties.
  • Conflicts and tensions are identified and dealt with early.

  Metrics

  • Percentage of suppliers with whom regular reviews are held.
  • Number of problems identified early (before significant costs are incurred) and resolved effectively.

• Practice

  Provide remedial training courses or workshops for suppliers in response to major incidents.

  Outcome

  The risk of major incidents recurring can be minimized.

  Metrics

  • Number of major incidents recurring.
  • Number of remedial training courses or workshops delivered.

• Practice

  Define contingency plans for alternative sources of supply, in case the existing supply base is compromised.

  Outcome

  The time required to switch to alternative sources, if required, is reduced.

  Metric

  Percentage of contracts for which alternative sources have been identified.

3Intermediate

• Practice

  Implement a supplier segmentation policy covering, for example, spend, business criticality of services, strategic importance, complexity/frequency of changes in requirements, and switching costs.

  Outcome

  Relationship management can be effectively focused on prioritized and preferred suppliers.

  Metric

  Percentage of the supply base that is segmented.

• Practice

  Assign relationship manager or supplier account manager roles for preferred suppliers.

  Outcomes

  • There is greater potential for idea-sharing, and a reduction in information bottlenecks.
  • Issues can be understood increasingly from the supplier's point of view, while communicating the procuring organization's own requirements and priorities.

  Metrics

  • Percentage of preferred suppliers for whom relationship managers or supplier account managers have been assigned.
  • Number of major incidents with suppliers.

• Practice

  Regularly benchmark all key supplier contracts against alternative suppliers using standardized criteria.

  Outcome

  Suppliers are continually encouraged to improve in order to meet or exceed industry standards.

  Metrics

  • Percentage of contracts that are benchmarked externally.
  • Percentage of suppliers showing performance improvements.

• Practice

  Track the performance of individual suppliers using transparent performance tracking methods.

  Outcome

  Poor performing suppliers can be identified and encouraged to improve.

  Metric

  Percentage of suppliers that meet performance objectives.

• Practice

  With preferred suppliers, seek opportunities for mutually beneficial interactions (other than traditional buy-sell transactions), such as joint product development.

  Outcome

  The innovative capabilities of suppliers can be harnessed to create product and service offerings that are ideally suited to the business.

  Metrics

  • Number of active project collaborations with suppliers.
  • Business value delivered to the organization through supplier project collaborations.

4Advanced

• Practice

  Invite suppliers to send a representative to the organization's strategic and operational meetings, and arrange for reciprocal representation at their meetings.

  Outcomes

  • Greater levels of understanding and empathy are fostered between the organization and its suppliers.
  • Opportunities for innovation are more readily identified.

  Metrics

  • Percentage of relevant in-house meetings attended by suppliers.
  • Number of supplier meetings at which the organization is represented.

• Practice

  Ensure that there are inter-supplier Operational Level Agreements (OLAs) in place across the supply chain for business critical services.

  Outcome

  There is increased confidence in the continuity and integrity of service supply.

  Metric

  Percentage of business critical services with OLAs in place.

• Practice

  Ensure supplier management practices are harmonized across all suppliers organization-wide, using, for example, supplier segmentation, customer/supplier perception surveys, performance scorecards, improvement charters, structured meeting templates, and benefits tracking tools.

  Outcome

  Relationship management becomes more cost effective, while knowledge sharing and collaboration are encouraged across the organization.

  Metric

  Percentage of suppliers managed using harmonized practices.

• Practice

  Establish guidelines for fostering collaborative relationships with preferred suppliers.

  Outcome

  Innovative partnerships are systematically created.

  Metric

  Number of product/service innovations arising from collaboration with suppliers.

• Practice

  Collate relationship management feedback across the supplier base.

  Outcome

  The supplier base can be managed holistically, rather than in silos, so that recurring issues can be dealt with efficiently.

  Metric

  Percentage of suppliers for whom relationship management feedback is collated centrally.

5Optimized

• Practice

  Continually review suppliers for switching flexibility and redundancy in their products and services.

  Outcome

  Vulnerability and exposure to supply disruptions can be reduced.

  Metric

  Duration since a review was conducted for switching flexibility and redundancy in suppliers' products and services.

• Practice

  Regularly benchmark relationship management practices and performance by comparing with peer organizations.

  Outcome

  The ability to identify opportunities for improvement is enhanced.

  Metric

  Number of practices benchmarked.

• Practice

  Implement a strategic development programme for key suppliers.

  Outcome

  In the longer term, mutually beneficial relations can be established with suppliers.

  Metrics

  • Key supplier turnover rate.
  • Number of suppliers that identify the organization as a priority customer.

This capability was introduced in Revision 16 as a new critical capability.

It was deprecated in Revision 18.01, being replaced by Sourcing and Supplier Management (18.01).

The following CCs cover topics that are related to SUM in some way:

IMInnovation Management

Guidance on stimulating innovation to deepen relationships between entities

ODPOrganization Design and Planning

Carrying out organizational design activities so as to streamline engagement interfaces

REMRelationship Management

Overarching relationship management practices for the IT function itself and for other business units and external entities

RMRisk Management

Establishing risk management practices for IT-related risks

SRCSourcing

Managing all strategic sourcing decisions, selecting IT service suppliers, and migrating IT services

SRCSourcing

The sourcing strategy for IT services, and how the initial selection of suppliers for IT services is conducted

SRPService Provisioning

Management of IT services