Website report on FSPF conference on 23 June 2008 at the Guoman Tower Hotel, London
“Delivering the benefits! Beyond SRM in financial services”
Forum shares secrets of SRM success
A clear understanding of supplier relationship management (SRM) is essential for procurement practitioners working in financial services - but they must gain senior level support to ensure success. There is also a need to increase executive awareness and recognition that poor SRM can have serious risk and cost implications. Those were among key messages delivered by specialist speakers at the latest Financial Services Purchasing Forum (FSPF) conference, “Delivering the benefits! Beyond SRM in financial services.”
The Guoman Tower Hotel in London hosted the event which took place on 23 June 2008. Over 40 organisations were represented with around 70 registrations, making it one of the most popular FSPF meetings ever, according to Forum chair John Thompson, senior procurement manager at Axa UK Procuremen, who welcomed delegates from across the UK.
New Forum officers appointed
John, who had completed his one-year term as chair, handed over to his successor David Allcock, senior purchasing consultant,procurement practice & SRM at Aviva UK Procurement. FSPF vice-chair will be Tilly Harvey-Godfrey, professional services category manager at AXA UK. The new Forum secretary will be Alison Haigh, head of IT procurement at Bradford and Bingley Group. Amanda Ferguson, central buyer for Winterthur Group Services, takes up the role of PRO.
SRM “not a bolt on”
In tracking the “SRM journey” taken by his organisation, Mike Jones, head of supplier management and methods, group procurement, at Lloyds TSB (LTSB), explained that the role of group procurement is to ensure that LTSB gets best value from its external expenditure and suppliers.
Mike believes that SRM must be “an integral part of the end to end process, not a bolt-on”. At LTSB, SRM involves policy, process and people, of which having a named senior accountable executive plays a pivotal role, he said.
“Executive commitment and understanding are ‘must haves’ for successful SRM.”
In 2007, LTSB spent £2.2 billion with third party suppliers, this is around half of the Group’s total cost base. “Our top 50 suppliers account for half of the money we spend with suppliers,” said Mike. LTSB has adopted a consistent ‘One Best Way’ approach to managing its top 50 suppliers which is driven by group procurement.
“We have a named accountable executive and relationship manager for each top 50 relationship.” Mike also explained LTSB’s ‘Academy’ approach to people development. Available to all, but targeted at those who manage relationships with top 50 suppliers, group procurement owns the training c
ontent which is delivered through the organisation’s corporate university.
Delegates define “great SRM”
“So what makes great supplier relationship management?” was the question that said Grant Amerigo, strategy and assurance manager at AVIVA, tackled in an interactive workshop designed to involve delegates providing practical solutions to SRM challenges.
The topics assigned to each work group included: creating and embedding continuous performance development of the purchasing team; internal customers and the supply chain; embedding CSR in the supply chain; and supplier risk and governance. Each group discussed what worked well in their organisations, and why.
“We are all facing increasingly difficult market conditions within the financial services sector as the fall out from the global credit crunch unfolds and write downs are announced to the city,” said Grant. This was reflected within the purchasing community through increased pressure to deliver bottom line savings, greater appetite for enhanced value delivery from the supply chain, and larger volumes in immediate short-term requirements, he said. Grant’s summary and report on delegate feedback will be available to attendees.
SRM in the future
Quoting Charles Darwin, Sheilagh Douglas-Hamilton reminded the audience that: “It is not the strongest that survive, or the most intelligent, but the most responsive to change”. Sheilagh, who is head of SRM at HBOS, led delegates “Beyond SRM – a journey into space” in a presentation that included economics, natural science and ornithology. Certainly a first for FSPF! The future might include outsourcing the relationship for the supplier to manage, she suggested. It might include ‘marking your own homework’, a supplier portal or managing by exception case reporting.
HBOS takes a category management approach to managing a 2007 supplier spend of £3 billion, she told delegates. SRM is a key objective and a significant investment has been made. But fully embedded SRM is complex and required a sophisticated procurement organisation.
Twenty years ago the more you shouted at a supplier, the more you got, said Sheilagh, but “consensus is emerging today about SRM”. It is getting better and more collaborative, but a huge amount of work is necessary to establish trust and credibility. Sheilagh warned of the huge challenge of avoiding reverting to type under pressure.
Sheilagh reviewed how SRM had developed from an environment that had involved transactional manual order placement, MRP2, strategic sourcing, performance and category management. She mapped out a vision of SRM where purchasing moved to partnership to alliance and finally to world-class SRM where you would look at suppliers as a virtual extension of your organisation.
CIPS’ SRM
Simon Sperryn, chief executive at CIPS, began by examining the benefits delivered by CIPS’ relationships with its suppliers. They included a better quality magazine and better return from the relationship with Redactive, publishers of Supply Management. A higher profile for the purchasing profession from Markit, the Institute’s partner in publication of the Purchasing Managers’ Indices. A more scaleable, efficient and responsive member service with less cost and risk to CIPS from Linney’s, the company that manages CIPS examinations. Greater reach to CPOs from the CIPS recruitment service with GPA, and brand support through integrity through CIPS’s international exam registration agreement with British Council. CIPS has access to a flexible, extensive range of skilled trainers through CIPS training courses delivered by PMMS, Supply Solutions and others.
Simon listed the assets of CIPS – it is growing,
financially sound, invests in improvement, is well governed, a market leader – which all added up to an
Institute valued by its members. The next stage, encompassing initiatives on membership, leadership, communications, profile and brand, would lead to a profession valued by the community, he said.
Looking ahead, Simon said that he believed that global competition and recession will drive better value management. Supply will become number one priority as shortages lead to volatility and power tips from buyer to seller and supply chain management will be seen as critical to environmental impact and reputational risk
How to capture value
“Capturing value from strategic suppliers is all about change management,” Mark Webb, chief executive of Future Purchasing, told Forum members. He introduced the survey undertaken by the International Procurement Leadership Forum (IPLF), of which his organisation is a member. The survey identified the current status of strategic supplier management from a global perspective and is the largest survey undertaken on this topic.
A common theme throughout the IPLF, 2006 and 2007, has been the need for
much more sophisticated demonstration of influencing strategies. The findings from the survey ‘Business Relationship Management’ are organised into the four faces of building value with strategic suppliers. These are: business requirements and the value drivers; different types of relationship management; operationalising strategic supplier relationship management; and leadership, people and behavioural implications.
The survey indicated that a broad range of additional value is available from strategic suppliers. Mark identified the four critical elements of SRM for procurement leaders to focus on: internal SRM capacity building; process and planning; supplier value acceleration; and finally implementation.
Suppliers like strong SRM
Emerging themes for successful SRM were discussed by
Peter Fawcett, director financial services at Alsbridge Consulting, independent advisors on outsourcing, shared services and offshoring. In his presentation, “Best practice SRM – the supplier’s view”, Peter said that strong SRM was popular with suppliers as it allowed them to be more innovative.
T
he increasing importance of SRM was demonstrated by key trends, including responding to fundamental market changes, ensuring sustainability after deals are signed, very high growth in both outsourcing and off-shoring, and the rapidly expanding base of both customers – first, second and third generation - and suppliers and areas of specialisation.
Peter revealed results of a supplier survey undertaken by Alsbridge into what suppliers think and want. Mutual respect was a high scorer, as was client commitment. “Clients need to deliver their side of the bargain and commit to providing the resources needed,” emphasised Peter. Also needed is an appropriately skilled service/relationship manager and good communication that shares a vision, not an emphasis on what the supplier could do for the customer. “There are dangers to being too prescriptive,” warned Peter.
Respect for the agreed governance process is also appreciated by suppliers… and they also wanted to be paid on time!
Looking ahead
Globalisation, e-procurement, corporate social responsibility and diversity, knowledge management and category management are among suggested topics for future Forums. David Allcock would welcome more suggestions or choices from the above so that the committee can get plans underway for the November 2008 conference.
The next Forum will be hosted jointly by Lloyds of London and Ernst & Young in early December. David also invited financial services organisations to contact him if they would be prepared to host the following one in June 2009.