SunTrust

SunTrust Banks Inc. is the seventh largest bank in the US with almost $120 billion in deposits. It has its roots firmly in the southern states, where its heritage dates back to 1891. The bank’s headquarters are in Atlanta, Georgia and it has around 1,800 branches and offices employing over 25,000 people. It offers a range of services, including personal and small business banking, wealth management and commercial, corporate and institutional finance. Until 2008 SunTrust was a significant shareholder in Coca-Cola, and it is reported that the original formula is still locked away in one of its safety deposit boxes.

SunTrust embarked on its SRM journey when Lamar Chesney, the chief procurement officer, recognised the need for a more holistic and cross-functional approach to supplier relationship management. A team was set up within procurement to develop the approach and was implementing it across the bank. The programme is led by Trupti Marshall, senior vice-president, supplier relationship management, a qualified engineer with a background in operational roles in manufacturing and retail. We talked to her about SunTrust’s SRM journey so far.

What is your role and the role of your SRM team?

There are two main elements: one is to develop SRM strategy and manage the programme, with the other being active management of key strategic suppliers from the first tier of our supplier segmentation. In addition, we provide oversight to suppliers in the second tier where we offer support when necessary.

What does SRM means to SunTrust and how does your current approach differ from previous practices?

For us, SRM is about creating a more holistic and cross-functional approach to supplier management. While we are part of the supply chain management organisation, we are a separate function from strategic sourcing. We view the relationship from more of a neutral perspective and work in the best interests of the whole group. We are concerned about the total health of the relationship beyond scorecard metrics. We are working enterprise wide and supporting risk management and mitigation, process improvement and relationship development. On occasion we will mediate in disputes and even act as an advocate for the supplier. We really see our role as setting both organisations up for success. Prior to the creation of the programme there were clearly pockets of good practice, but most activity was based on operational performance management.

In your response to our survey you indicated that SRM progress over the past 12 months had been significant in several areas. Can you give us some examples?

The last 12 months have been encouraging for several reasons. We are certainly experiencing more of a pull from the business and we now find ourselves more involved in strategic decision making. The feedback is that the business is getting more comfortable with the process as we are able to demonstrate value. A good example of this value was our involvement recently when one of our business units was in dispute with a supplier. The situation had gotten to the point of potential litigation. What wasn’t evident to either party was the impact this could have on the wider relationship with the group. This is where the grasp of the “big picture” that SRM provides was key. Armed with this understanding of the wider implications, we were able to play the part of honest broker and facilitate internally, and externally, to reach an agreement that avoided litigation and damage to the long-term relationship.

Another area where we have made progress is in developing the skills and competencies of the team. This has been a challenge from the start. It’s widely acknowledged that the skills and attributes required for SRM are hard to find in one individual. Whereas people from the line of business may have the technical and product knowledge, they may lack the commercial skills. And people from procurement may have commercial skills and some technical or product knowledge but may lack the “softer” skills required for SRM. In recruiting our team we made the personal attributes the priority, as we believe these are harder to train. Most of our training is on the job, acquired through exposure to the business and also other SRM approaches. We have also done some more structured training to help the team develop their strategic thinking. For us it’s key that people develop the ability to think beyond the deal.

What have been the toughest obstacles to overcome?

I think our toughest challenge has been integration with the business. By this I mean getting them to recognise the potential value from managing and developing these key supplier relationships in a different way. Having largely achieved this through proactive engagement with key stakeholders, we still have instances where we need to get a seat at the table when strategic decisions are being made.

Do you believe SRM will become more important to SunTrust over the next 12 months?

Yes, without a doubt. As a premier financial institution and stewards of other wealth, it is incumbent upon us to demonstrate the highest standards of governance and control. This includes the way in which we manage our suppliers, in particular with regard to risk. In addition, we are acutely aware of the need to optimise the value we derive from existing contracts, as well as driving and capturing additional value.

You mentioned that you need to get the business to recognise the value of SRM. How do you measure and report what SRM is achieving?

This is another challenge. SRM has always struggled to directly quantify the benefit it brings. In many cases it acts as an enabler for benefits that are captured elsewhere. At SunTrust we have tried to create a single view of the relationship in a multi-criteria scorecard. This includes the usual measures of performance, quality, delivery and risk, along with other relationship health indicators such as financial status and feedback from our regular 360-degree relationship review. We recognise that the more aspects of the relationship we can quantify the easier it will be to identify issues, root causes and corrective actions. That’s why we continue to examine additional ways to measure and report on risk.

Can you describe your 360-degree relationship review in a little more detail?

We think it is absolutely essential that suppliers get an opportunity to provide feedback on what we are doing that is having a positive or a negative impact on the relationship. Our 360 review provides this opportunity within a structure and using a channel that is acknowledged by both parties as appropriate. This also provides an opportunity for internal stakeholders to provide feedback on how they perceive the supplier to be performing. The approach might be better understood from this diagram:

What might make our approach a little unusual is that we carry out a separate review for each SunTrust business unit that has an engagement with the supplier, and where appropriate the business units of the supplier. This enables us to quickly highlight inconsistencies that might be hidden in a more aggregated analysis. We look to tackle overall levels of performance, but in many cases it is the mismatch in feedback on the same subject that points to other problems that also need to be addressed. Carrying out these periodic reviews enables us to timely evaluate the effectiveness and impact of agreed-upon corrective actions.

You ranked innovation as the single biggest potential source of value from SRM over the next 12 months. How are you planning to realise this?

We do see capturing innovation from our suppliers as a real opportunity. Historically, we have not been as good at it as we would like. SRM does provide an excellent vehicle, but we need to get a bit more focused and creative in our approach. We are currently looking at identifying the supplier relationships that have real potential to contribute to our growth strategy through innovation and joint opportunities. It might be that these suppliers are regarded more as strategic alliances and form a separate grouping within our top tier or even a fourth tier. For this endeavour, we are in active pilot mode.

Like many of our survey respondents you estimated that less than 25% of your strategic suppliers regard you as a strategic customer or as a ‘customer of choice’. Does this concern you?

It does indeed and this was really interesting feedback. While we recognise that we cannot be strategic to all our suppliers it is important to get their feedback and to create an environment where they feel comfortable giving it. We believe the 360 reviews go some way to achieving this, but, in addition, we will hold supplier feedback forums where suppliers with longstanding relationships will be able to provide honest feedback on what we need to do as a business, and as individuals, to be regarded as a customer of choice. In particular, we want to open a dialogue with account managers that have witnessed the birth of SRM at SunTrust and give us unabridged insights into what is working for them.