SRM rarely gets blocked because leaders disagree with the idea. It gets blocked because the pain is spread out. A few hours here chasing supplier documents. Another late onboarding there. A contract renewal that quietly rolls over. A quality issue that triggers rework, claims, or expedited freight. None of these look like “a big enough problem” on their own.
Together, they become a silent tax on procurement, supply chain, sourcing, and quality.
That is the cost of inaction (COI): the measurable, recurring cost of staying with fragmented supplier data, manual workflows, and inconsistent governance instead of moving to a modern SRM suite. And in many organizations, COI grows faster than the subscription line item ever will.
The cost of poor SRM can be grouped into three buckets: operational, tactical, and strategic. Let’s break those down and attach real numbers to them using a few high-confidence external benchmarks.
Poor SRM shows up first as time. Not “work” time, but chasing, validating, cleaning, and re-creating supplier information across ERP, email threads, shared drives, SharePoint, and spreadsheets.
Some common operational symptoms are:
Time spent chasing supplier data, documents, and approvals across systems
Duplicate supplier records and inconsistent data
Spreadsheet maintenance and manual reporting instead of real-time visibility
Manual onboarding and re-approvals slowing vendor enablement (often taking months)
This is where procurement and quality teams feel the squeeze: the team is “busy,” but the business still waits.
A practical way to quantify this is to treat manual SRM as an inefficiency tax. If manual SRM drives 30% inefficiency across 20 employees with a 70,000 EUR salary, that is 420,000 EUR per year in COI.
You can adjust this for your reality:
COI from manual SRM = (number of people affected) x (fully loaded cost) x (estimated inefficiency %)
Even conservative assumptions usually surface a six-figure annual drag. And that drag hits every industry: manufacturing, food and beverage, energy, utilities, industrial automation, chemicals, mining and metals, pharma, automotive, and yes, service-heavy sectors like law firms and insurance companies (where third-party onboarding, compliance checks, and vendor risk reviews become bottlenecks).
This is the COI that finance understands instantly: negotiated value that never hits the P&L because buying behavior and supplier governance are inconsistent. Maverick spend and poor contract compliance drive savings leakage.
A strong external benchmark here comes from The Hackett Group. In a 2025 release on “Digital World Class” procurement, Hackett notes that stronger processes and stakeholder perceptions reduce maverick buying and contract noncompliance, resulting in “60% less savings lost.” (The Hackett Group)
Translate that into COI language:
If you are not operating with modern, guided, data-driven procurement processes, you are structurally exposed to higher leakage.
SRM is one of the key systems that closes this gap by creating a single source of truth for suppliers, performance, compliance evidence, and follow-ups.
A simple leakage example:
50,000,000 EUR annual addressable spend x 2% leakage = 1,000,000 EUR annual COI
Two percent leakage is not a scary assumption. In many organizations, it is optimistic, especially when supplier records are incomplete, contracts are hard to find, and “preferred supplier” status is not enforced by process.
This is where poor SRM stops being “procurement’s problem” and becomes an enterprise problem.
Economist Impact research on supply chain disruption found that disruptions incurred substantial financial costs, averaging 6-10% of annual revenues as reported by surveyed organizations. (The Economist Impact)
That number is big because disruption years are big. And this aligns with what most procurement and supply chain leaders have lived through: capacity shocks, logistics failures, geopolitical events, cyber incidents, and supplier insolvencies that do not politely stay inside category plans.
SRM does not eliminate disruption. But poor SRM makes disruption more expensive because:
supplier risk signals are scattered
audit evidence is slow to collect
corrective actions are not tracked consistently
escalation is delayed because no one has a trusted, shared view of supplier status
We frame this as “risk blind spots” caused by slow onboarding and fragmented data.
Supplier onboarding is a hidden strategic bottleneck. ISM has stated that supplier onboarding “can take up to six months at many large companies.” (ISM)
That delay is not just annoying. It is expensive:
You cannot qualify alternate sources fast enough when a critical supplier slips.
You cannot scale new product launches if supplier approvals drag.
In regulated environments (pharma, food and beverage, chemicals), slow qualification can become a compliance and service-level risk, not just a timeline issue.
And in sectors like insurance and law firms, slow third-party onboarding and fragmented due diligence create a different kind of exposure: regulatory scrutiny, data privacy risk, sanctions risk, and reputational risk when vendor controls are inconsistent.
If you want to build a credible “do nothing” baseline, use three numbers your organization already has:
People cost (manual SRM drag)
How many roles spend time on supplier onboarding, assessments, audits, and data chasing?
What percent of that work is pure admin?
Leakage cost (missed value)
What is your addressable spend where compliance and preferred supplier usage matters?
What is a defensible leakage assumption (even 1-2%)?
Risk cost (exposure in disruption years)
What is the historical impact of disruptions on revenue, service levels, or cost?
What would faster onboarding and earlier risk signals have changed?
Our SRM business case deck includes ready-to-edit examples for inefficiency and leakage, plus disruption-related examples you can tailor. Let us know if you want a copy!
Bottom line: SRM software is not “nice to have” when performance and quality matter. Inaction has a price tag. And once you quantify COI across operational drag, savings leakage, and strategic risk, the SRM investment decision usually stops being a debate about tooling and starts being a conversation about financial control.
If you're looking to build your business case internally for adopting modern SRM software, reach out to our team at Kodiak Hub and we'll lend a helping hand.