Conventional wisdom states that about 80 percent of a typical company's revenue comes from 20 percent of its customers. A similar mantra exists in procurement: In many organizations, 20 percent of the vendor base supplies up to 80 percent of the purchased parts, materials, and products.

But both of these perspectives may soon be out of vogue. After all, they were coined before the existence of e-procurement, global operations, and "low-cost country sourcing." Nowadays, leveraging the most cost-effective resources regardless of the supplier's size or location has become a performance cornerstone for retailers and manufacturers everywhere. However, actually moving beyond "80–20" procurement will require companies to adopt even more sophisticated sourcing practices in order to build more relationships with precisely the right suppliers.

To discover just how well-prepared the top companies are to move beyond "80–20" procurement, Accenture launched an in-depth research initiative regarding supplier relationship management (SRM). The survey responses of 229 senior procurement executives in Europe and the United States were collected and analyzed to determine: 1) how companies can manage supplier relationships to achieve greater, more sustainable benefits; and 2) the characteristics of supplier relationship management leaders. The responses revealed many insights about the growing significance and substance of both current and future supplier relationships.

Think of SRM as the systematic management of supplier relationships to optimize the value delivered through those relationships over the course of their life cycles. SRM focuses on post-contract activities such as:

• Increasing the accuracy and availability of contract information
• Monitoring, measuring, managing, and reporting on supplier performance
• Improving internal users' compliance (i.e., minimizing "rogue buying")
• Designing and implementing process improvements jointly with suppliers, such as new logistics solutions and quality-assurance programs
• Working with suppliers to reduce costs on both sides
• Launching joint product-development projects with suppliers.

Successfully performing the above tasks is tricky yet rewarding. SRM leaders—the 18 percent of surveyed companies that derive more than half of their procurement benefits from activities occurring after the contract award—reported procurement economies that were three times higher than the survey average. In addition, every survey respondent stated that improved SRM practices would enhance their procurement effectiveness, sometimes by as much as 20 percent.

What are the habits of highly effective supplier relationship management leaders? Survey results show that SRM leaders put greater emphasis on procurement strategy and governance. They also work continuously to improve the structure of the procurement organization and to develop metrics for guiding and measuring procurement-related improvements. SRM leaders are big on cross-enterprise integration, thus ensuring that the entire extended enterprise is using the same playbook. They frequently work harder to develop their human resources and define and optimize relationships with internal stakeholders. SRM leaders also:

Use technology to enable SRM processes and performance management. SRM leaders realize the above objectives by leveraging state-of-the-art technology, particularly tools that enhance requisition-to-pay and e-procurement/e-sourcing processes. SRM leaders were twice as likely as the aggregate respondent population to implement technologies that support contract management and business-to-business integration and supplier collaboration.

Segment their supplier base and develop specific strategies for each segment. SRM leaders are prone to segment their suppliers, most often by size of spend but also by market, quality of relationship, quality of products and services, degree of integration into the supply chain, and even by cultural/strategic alignment with the business's core goals. Conceptually, it is quite similar to activity-based management: SRM leaders create specific groupings and then formulate customized strategies for balancing procurement considerations against total cost of ownership, cost-to-serve, and other customer-valuation criteria.

Adopt a holistic approach to SRM and work collaboratively with those outside of the procurement department. As shown in the graphic, the ability to work cross-functionally is paramount among SRM leaders. This skill is critical to successful intercompany activities, such as joint product-development and process-improvement projects, and the removal of costs from the supply chain. Toward this end, SRM leaders regularly discuss topics such as pricing challenges, cost-reduction opportunities, and options for problem resolution with their suppliers. Furthermore, at many SRM leaders, production and design departments work with suppliers to identify the right sourcing approach for a product or service.

Although the path to partnership is rarely easy, companies that have embraced SRM are clearly winning in the marketplace—and not just through cost reductions. SRM leaders are able to realize other benefits beyond savings, including reduced risk, increased speed-to-market, and access to new technology and innovative solutions. In fact, 76 percent of SRM leaders stated that they would view SRM as having even greater importance in the near future. As supplier relationships become more global and complex and the rule of 80–20 becomes less fashionable, SRM will be even more integral to helping companies realize value and achieve high performance.