AirServices
Fleur Edgerton on the importance of SRM at Airservices Australia, and how to make suppliers part of your ecosystem.
Airservices Australia is the Federal Government-owned organisation responsible for the safe and efficient management of 11 per cent of the world’s airspace and the provision of aviation rescue fire fighting services at 29 of Australia’s busiest airports. It connects people with their world safely - linking family and friends, generating economic activity, creating jobs and facilitating trade and tourism.
It occupies a unique position in the Australian aviation ecosystem, working with everyone from recreational to international pilots; unmanned and remotely piloted aircraft users; customers; the community; and industry. It is tasked with supporting the sustainable growth of aviation - balancing industry efficiency with community interests and operational performance.
Established in 1995, Airservices is wholly owned by the Australian Government and is accountable to the Minister for Infrastructure, Transport, Regional Development, and Local Government. As such, it aligns with the Commonwealth Procurement Rules that govern public-sector organisations. These rules are designed to ensure competition and transparency. If Airservices wishes to co-develop with a supplier, it is mindful to maintain a competitive landscape.
“It’s my role as a business leader to partner and engage across the market to connect industries and the business. I draw upon my experience to manage large-scale strategic relationships to ensure Airservices adheres to procurement guidelines and rules, and maintains the value and delivery of long-term sustainable business outcomes,” says Fleur Edgerton, Airservices’ Head of Procurement and Commercial Services.
Central Support
Edgerton, who joined the organisation two-and-a-half years ago, consolidated procurement and commercial services from four separate units into one function and implemented a new operating model. This model centralised the team and structured it across portfolios that cover infrastructure and corporate services, technology and digital, and governance enablement, which includes a center of excellence. The team also has a procurement and commercial services transformation lead and a business revenue and commercialisation lead, because—unusually for a procurement department—it is responsible for some chargeable services. These services include contracted air traffic control, aviation rescue firefighting services, engineering support and maintenance services, and data commercialisation activities, which together generate more than AUS$20 million a year in revenue.
“This gives the function a unique insight and ability to optimise how it manages its supplier and customer relationships on both sides of the commercial landscape,” says Edgerton. “This includes being able to apply learnings about how it approaches the market with how this might be perceived by potential suppliers by leveraging the experience of the revenue-generating side of the function.” Procurement and Commercial Services also supports Airservices through relevant change programs, such as the current work to transform air traffic management in Australia by replacing two systems with a single advanced system. Meanwhile, a commercial strategy team examines what’s happening in the market and considers how it can leverage the market to execute Airservices’ strategic and organisational outcomes.
Building Relationships
Airservices used to operate a traditional ‘build, own, operate’ delivery model but has since pivoted to a service-oriented environment. As such, it is procurement’s role to deliver value-for-money outcomes through all third-party engagements during the lifecycle of any deal or partnership. “This,” says Edgerton, “requires a focus on supplier management to extract value and to ensure ongoing value throughout the lifetime of a contract.”
“Without supplier relationship management (SRM), you can lose a massive percentage of the value of the original deal within 18 months of it going live, so we really focus on making sure suppliers deliver our desired organisational outcomes and benefits.”
Relationships are crucial at Airservices because a significant percentage of its annual spend is with a small number of suppliers that deliver mission-critical systems. “Our top six suppliers account for nearly half of our AUS$533 million annual spend,” says Edgerton. “A total of 80% of yearly spend is with 60 key suppliers, while the rest sits in the tail.”
Geographical location is another key consideration. When building relationships with strategic suppliers, Airservices’ commercial team is mindful of the location of the supplier’s global P&L and works hard to engage leaders from overseas as well as the local team. “Big tip,” says Edgerton, “ensure you understand who owns the P&L within the supply base and make sure you have executive engagement. Spend time meeting them and understanding where the constraints lie.”
"Spend a lot of time with offshore suppliers and build relationships with them. Ensuring you have trust and two-way communication is critical in every engagement; it helps you to have access and quickly unstick any issues,” Edgerton emphasises. Airservices maps out who the key individuals are and creates inverted account plans to understand who and where the P&L is held. “Get to know your supplier as they get to know you,” she advises.
Change Underway
Edgerton joined Airservices from MLC Life Insurance, having previously held senior positions at Westpac, Ausgrid, and NSW Roads and Maritime Services in Sydney. She recognised that Airservices would benefit from embedding structured Supplier Relationship Management (SRM), backed by appropriate executive support, investment, and clarity about why these changes were being implemented. “We want to extract mutually beneficial value over the course of our contracts, enhance outcomes, and deliver value to our customers and shareholder,” she says.
The commercial team engaged with State of Flux to carry out a segmentation exercise of its supply base and is establishing supplier performance metrics covering cost, performance, ease of doing business, delivery, innovation, risk, and compliance. “We are still rolling out these activities to ensure Airservices speaks with one voice with our suppliers and helps to embed them into our culture,” she explains.
Airservices also conducted a Voice of the Supplier survey to understand how it was viewed by its key suppliers. That process included some deep-dive interviews with several strategic suppliers, the results of which are being incorporated into the next stage of its change program. “We are looking forward to further enhancing relationships with our suppliers as we extract those insights. It’s already been invaluable,” Edgerton says.
Airservices now has structured governance in place, with monthly performance and commercial meetings with some strategic suppliers and clarity over roles and responsibilities on both the buyer and supplier sides. The organisation is having more collaborative conversations and is now more consistent as a business in its approach to suppliers.
Critical Success Factors
Fleur Edgerton on the Effective Roll-out of a Supplier Relationship Management (SRM) Programme
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Clear Objectives:
Clearly define the goals and objectives of the SRM programme. This includes determining the desired outcomes, such as reducing the cost to service, improving the quality of performance, minimising delivery and operational risks, ensuring value for money (VFM) is maintained and optimised throughout the engagement of the relationships, and extracting value over and above the contract through innovation. Clear objectives help guide the implementation and provide a focus for all stakeholders involved.
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Executive Support:
Secure executive sponsorship and support for the SRM programme. Executives play a key role in driving the programme’s success by providing necessary resources and promoting the importance of SRM within the organisation.
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Internal Capability Building:
Invest in training and building internal capabilities related to SRM. Develop the necessary skills, knowledge, and tools for effective SRM within the organisation. This empowers employees involved in managing supplier relationships and helps to ensure the long-term success of the SRM programme.
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Supplier Segmentation:
Segment suppliers based on their strategic importance to the organisation. Categorise suppliers based on criteria such as spend, criticality, or the potential value they bring. This segmentation helps to prioritise efforts and resources toward the most critical suppliers and tailor relationship management strategies accordingly.
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Stakeholder Engagement:
Communicate the importance and benefits of the SRM programme to internal stakeholders. Engage key stakeholders from different departments or functions who interact with suppliers, such as procurement, operations, logistics, and finance. Collaborative involvement ensures alignment, cooperation, and buy-in throughout the SRM journey.
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Governance Structure:
Establish a clear governance structure for managing supplier relationships. Define roles, responsibilities, and decision-making processes for both internal and external stakeholders. This structure ensures accountability and effective communication channels for managing and nurturing supplier relationships.
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Performance Monitoring:
Implement performance metrics and monitoring mechanisms to assess supplier performance against pre-established key performance indicators (KPIs). Regularly review the results and provide feedback to suppliers. This ongoing measurement helps track progress and identifies areas for improvement.
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Continuous Improvement:
Nurture a culture of continuous improvement. Encourage open communication, feedback, and collaboration with suppliers to drive innovation, quality enhancements, and process optimisation. Regularly review and update the SRM programme to adapt to changing organisational needs and evolving supplier relationships.
By considering these critical factors, organisations can enhance their supplier relationships, drive value, and achieve their SRM programme’s desired outcomes.
“Suppliers told us there was now greater alignment towards common goals, more streamlined internal processes, and that we were adapting to requests. The results also gave us some insight into areas where we can focus our attention for the next stage of the programme,” says Edgerton. Some of this will include leveraging technology and digital industry experience and prioritising sustainability activities.
“We were already highly engaged with suppliers, but the survey results have given us an alternative feedback loop. Getting these insights is critical to our development. It helps to make us a better customer because we want to be a customer of choice and get access to the best and brightest.”
Strategic Engagement
While aligning with public procurement rules means Airservices has to be careful about its engagements with suppliers, it ensures suppliers are kept informed about its values and overall strategic objectives.
“We’re on a maturity journey and evolving in that space,” says Edgerton. “Suppliers are aware of our core values, which resonate easily across our supply base. These are ‘Safe always, Service first, Love what we do, Work as one, and Own it.’ We like to share our strategic goals with suppliers so that they can understand and find ways to engage with us. We just have to be prudent because we’re a Commonwealth-owned operation, so competition and transparency are key requirements.”
Relationship and trust are critical, says Edgerton. Respect and understanding each other’s priorities are also paramount, as is cultivating open communication so any concerns can be shared and collaboration can occur where it is permitted.
“I am relationship-driven in business and always have been. That’s what I’m passionate about doing. I’m leveraging market expertise to maintain our core business and remain current and on top of trends, including digitalisation and automation.
“We orchestrate the business; we don’t own the executive engagements—they do. The business knows their business more than we do—we support them. We have a role to play as facilitators and orchestrators, resolving issues and helping with relationships.”