Emptoris - Creating a Buzz

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potential benefits that a formal SRM programme could deliver. Mark Hughes, group procurement director of Premier Foods, the UK’s largest food company, is certainly an advocate. Having established a programme some years ago, Premier now has a formal SRM arrangement with nine of its most strategic suppliers. “We started quite early on with our SRM programme… out of 5,500 suppliers today, we’ve got nine. But we’ve found it difficult to grow that anymore,” he said. The fact that Hughes has found it so difficult is not surprising – formal SRM programmes take a lot of work and resource if done properly. But when successful, they can have a fundamental and positive impact on the business. Sweet success Hughes offered one example of a positive result that was directly attributable to its SRM programme. “British Sugar supplied us with a relatively small amount of our overall sugar,” he said. “It wanted to grow that and we saw security of supply as very important in a changing [regulatory] regime. We also “I’ve got to confess to being slightly sceptical,” said Adrian Turner during a recent roundtable debate in London on supplier relationship management (SRM). As the head of European corporate procurement at Apple his comments raised a few eyebrows. After all, if there’s one organisation in the world you would expect to be enthusiastic about the opportunities in its supply chain, it would be Apple. Happily, Turner isn’t sceptical about working with suppliers – rather, he believes SRM is a bit of a buzzword. “The reality is that we do a lot of this already,” he said. “The scepticism for me comes from the fact that we’ve come up with a collective noun to describe what the vast majority of us do in regards to best practice anyway.” Whether this is true is open to debate – recent research carried out by Procurement Leaders revealed that 96% of procurement professionals plan to increase their SRM activities over the next 12 months; while the majority of participants at this Emptoris-sponsored event seemed enthusiastic about the saw some very significant streamlining opportunities in terms of taking cost out of our joint supply chains. Working together over a three-year period we managed to do that. British Sugar managed to grow its sales to us and we managed to take cost out of our joint supply chain.” But what exactly is SRM? Is it, as Turner suggests, simply a “collective noun” for best practice already widely used, or something more sophisticated? “If everyone right now were to write down what they thought SRM was, we’d have 10 different answers,” said Martin Berr-Sorokin, senior vice president and general manager of supplier lifecycle management at Emptoris. “It’s really about the relationship and the relationship has a lot to do with supplier lifecycle management (SLM), managing the supplier from the phase in to the business to the phase out.” This distinction between SLM and SRM is an interesting one, with the former gaining traction. In simple terms, SLM is the managing of a supplier through the entire lifecycle of its involvement with a company, and includes supplier identification, performance management as well as SRM. Parts of SLM are naturally relevant to the entire supply base. SRM, on the other hand, is a methodology whereby a buying CREATING A BUZZ If planned and implemented properly, most agree that formal SRM programmes bring significant performance benefits to the wider business – others would argue that it is already part of procurement best practice, writes David Rae We’ve come up with a collective noun to describe what the majority of us do in regards to best practice anyway Graham Chalmers Director, global category management Unisys Alessandro Spadini Purchasing associate director IMS Barilla Adrian Turner European head of corporate procurement Apple Jason Norris Head of procurement EDF Energy Jon Lowther Head of procurement development Associated British Foods Guy Allen Former VP, global procurement Fujitsu Portraits: Julian Cornish-Trestrail 48 PROCUREMENTLEADERS

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Read this Procurement Leaders article to learn how Supplier Lifecycle Management solutions foster greater communication and trust between buyers and suppliers to achieve true value.

Transcript of Emptoris - Creating a Buzz

Page 1: Emptoris - Creating a Buzz

potential benefits that a formal SRM programme could deliver.

Mark Hughes, group procurement director of Premier Foods, the UK’s largest food company, is certainly an advocate. Having established a programme some years ago, Premier now has a formal SRM arrangement with nine of its most strategic suppliers. “We started quite early on with our SRM programme… out of 5,500 suppliers today, we’ve got nine. But we’ve found it

difficult to grow that anymore,” he said. The fact that Hughes has found it

so difficult is not surprising – formal SRM programmes take a lot of work and resource if done properly. But when successful, they can have a fundamental and positive impact on the business.

Sweet successHughes offered one example of a positive result that was directly attributable to its SRM programme. “British Sugar supplied us with a relatively small amount of our overall sugar,” he said. “It wanted to grow that and we saw security of supply as very important in a changing [regulatory] regime. We also

“I’ve got to confess to being slightly sceptical,” said Adrian Turner during a recent roundtable debate in London on supplier relationship management (SRM).

As the head of European corporate procurement at Apple his comments raised a few eyebrows. After all, if there’s one organisation in the world you would expect to be enthusiastic about the opportunities in its supply chain, it would be Apple.

Happily, Turner isn’t sceptical about working with suppliers – rather, he believes SRM is a bit of a buzzword. “The reality is that we do a lot of this already,” he said. “The scepticism for me comes from the fact that we’ve come up with a collective noun to describe what the vast majority of us do in regards to best practice anyway.”

Whether this is true is open to debate – recent research carried out by Procurement Leaders revealed that 96% of procurement professionals plan to increase their SRM activities over the next 12 months; while the majority of participants at this Emptoris-sponsored event seemed enthusiastic about the

saw some very significant streamlining opportunities in terms of taking cost out of our joint supply chains. Working together over a three-year period we managed to do that. British Sugar managed to grow its sales to us and we managed to take cost out of our joint supply chain.”

But what exactly is SRM? Is it, as Turner suggests, simply a “collective noun” for best practice already widely used, or something more sophisticated?

“If everyone right now were to write down what they thought SRM was, we’d have 10 different answers,” said Martin Berr-Sorokin, senior vice president and general manager of supplier lifecycle management at Emptoris. “It’s really about the relationship – and the relationship has a lot to do with supplier lifecycle management (SLM), managing the supplier from the phase in to the business to the phase out.”

This distinction between SLM and SRM is an interesting one, with the former gaining traction. In simple terms, SLM is the managing of a supplier through the entire lifecycle of its involvement with a company, and includes supplier identification, performance management as well as SRM. Parts of SLM are naturally relevant to the entire supply base.

SRM, on the other hand, is a methodology whereby a buying

creating a buzzIf planned and implemented properly, most agree that formal SRM programmes bring significant performance benefits to the wider business – others would argue that it is already part of procurement best practice, writes David Rae

We’ve come up with a collective noun to describe what the majority of us do in regards to best practice anyway

graham chalmersDirector, global category managementUnisys

alessandro SpadiniPurchasing associate director iMS Barilla

adrian turnereuropean head of corporate procurementapple

Jason norrisHead of procurementeDF energy

Jon LowtherHead of procurement developmentassociated British Foods

guy allenFormer VP, global procurementFujitsu

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Julia

n Co

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organisation employs a set of techniques to drive performance management and collaboration with a group of pre-determined strategic suppliers. The segregation of those suppliers is a crucial part of the process and four widely accepted benefits are targeted – reduced cost, reduced risk, improved service levels and/or quality and greater innovation.

Jon Lowther, head of procurement development at Associated British Foods, explained how one of his

brands had made sure that it taps into supplier innovation. “With our Twinings brand, the packaging is a much bigger cost driver than the actual tea,” he explained. “Making sure that [consumer] perception and your command on shelf is at the forefront is critical. It has worked with its carton supplier to look at ways in which it can reduce cost as well as bring new innovation in terms of design.”

Lowther went on to explain how the

Mark HughesGroup procurement directorPremier Foods

Nick JenkinsonHead of procurementDaily Mail & General Trust

Martin Berr-SorokinSenior VP and general manager of SLM,Emptoris

Mark HollisonDirector of procurementNapp Pharmaceuticals Holdings

Justin PenningtonDirector, global supply chain strategyDell

Twinings brand employs a procurement innovation manager, who sits within the marketing function and whose job it is to deliver predominantly packaging innovations to the marketing team. And this is a growing trend – Unilever also employs a number of scouts who are tasked with identifying innovations in the supply base.

For others, a formal SRM programme has provided benefits in areas other than innovation; such as allowing

CPOs to push through decisions that may not have ordinarily been possible. “A company that everyone moaned about and continued to fail, gave us cause to bring in the managing director,” explained Guy Allen, former vice president, global procurement at Fujitsu. “Three months later, it continued to fail

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and now it no longer has any business with us. When we took that to the CEO, we were able to justify paying a bit more to get a much better supply.”

While the four benefits of SRM are widely accepted, Alessandro Spadini, purchasing associate director, IMS at Barilla, and owner of his organisation’s recently launched SRM programme, believes there is a fifth pillar – or at least, a significant additional by-product. “One of the targets we have is to enhance the level of knowledge and effectiveness of our internal people on how they can manage innovation, add value to the supply chain and take care of risk management,” he said. “Working also on the internal aspect is part of SRM.”

Spadini’s point is a valid one and attendees went on to discuss the talent requirements of those in purchasing who are either managing SRM or act as the conduit between the buyer and those strategic suppliers in the programme.

And Justin Pennington, director of global supply chain strategy at Dell, expressed concerns about whether the demands that SRM presents can be met. “We are asking our procurement people

to be good negotiators, to be financial gurus, to be market strategists, to be commodity experts,” he said. “Innovation is solicited through dialogue and if you’re not asking the right questions, or if the people being put in those positions don’t have the right level of knowledge, then that will stifle opportunity.”

Character buildingGraham Chalmers, director of global category management at Unisys, meanwhile, argued that a few more extrovert procurement professionals

would probably help. “It’s almost as if the communication skills need to be developed, because procurement, has a tendency to be a little inwards looking,” he said. “A little more sales and marketing skills would go a long way.”

Along with having the right people, participants talked about the need to be open with suppliers and to treat them as true partners. “If you want to get to an optimal position across the supply chain,

then transparency is fundamental to that,” said Lowther. “If you turn it on its head and you’re a supplier, who are you going to take all your great ideas to? It has to be someone who is receptive and, then, will do something with it.”

Dell’s Pennington said he invites his suppliers to get involved in strategy formulation. “Part of the SRM concept is about sharing some of that visibility and treating them as an equal partner,” he said. “So, sharing some of your strategic plans, working with them as if they’re part of the company.”

However, Lowther also reiterated the importance of executive support and how getting the full weight of senior management behind the SRM vision was a key requirement. “One of the key things is around internal stakeholders,” he said. “It’s not even about getting to the suppliers, it’s about making sure you’ve got your stakeholder group lined up behind you. You can’t have the CEO or the sales director saying, ‘What’s this SRM

You can’t have the CEO or the sales director saying, ‘What’s this SRM thing that’s going on?

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thing that’s going on?’ Their engagement is critical.”

It was a point supported by Mark Hollison, director of procurement at Napp Pharmaceuticals. “If you’re able to explain in a manner that everyone in the business buys into, then your advocates aren’t just the people in procurement – it’s everybody,” he said, before going on to explain how he has developed the strapline VIP (value, innovate, protect) to push the procurement brand into the business. “It seems to work, and has engaged the business very well.”

Naturally, discussion around the table was predominantly focused on the benefits of developing SRM and the demands and requirements of doing so. However, there was also significant time spent on the risks and limitations of it – after all, it’s a huge commitment of time and resource and it’s crucial that it is all well spent.

“One of the problems I have with SRM is that they become defined programmes in their own right and start to take on a life of their own with staff, with agendas and benchmarks,” said Apple’s Turner. “Before you know it, the business has gone one way and SRM is

trundling off in another direction.”Allen, on the other hand, highlighted

the limitations of the methodology, as the power in supplier/buyer relationships doesn’t always lie with the buying organisation. “If I were to look at our top-20 suppliers that were there when I joined [Fujitsu, more than five years ago], 15 of those are probably still there,” he said. “It’s unlikely that I could move them, because they are the type of suppliers our customers want us to buy from.”

Universal appealMeanwhile, Premier Food’s Hughes described how not all suppliers will be interested in getting involved – despite being selected as being strategic and worthy of investment. “One of our packaging suppliers to our Bisto brand – so absolutely crucial – we saw as a strategic supplier,” he said. “But actually, they weren’t interested and we removed them from our formal SRM programme after just a year.”

This latest Procurement Leaders roundtable, was a lively affair. The subject matter and mix of participants ensured that the discussion was both informative and challenging; and a wide

range of issues were discussed in detail. It was clear that they saw the potential

in SRM – but they also recognised the potential difficulties, challenges and risks involved. If entered into with clear expectations, the right people and the full support of the business and supply base, it could reap huge rewards in terms of cost reduction, new innovations, risk management and quality assurance.

But other benefits also arise, including the ability to look through the eyes of the supplier community. “One piece of our software is to measure the performance of the supplier,” said Emptoris’ Berr-Sorokin. “But our customers said that they also want to be measured by suppliers – they want a reverse rating and want to know where their strengths and weaknesses are.”

And this is one of the main benefits of SRM and SLM – it fosters greater communication and trust between buyers and suppliers. And from this type of relationship, true value can be achieved.

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