Cabinet Office
Cabinet Office embraces suppliers and operations in SRM vision
The UK government sees supplier relationships as critical to increasing value and reducing risks from contracts. But to ensure its SRM programmes are sustainable, it must make sure departments’ operations and suppliers are on board.
Suppliers can be excused a touch of cynicism. Many of the larger, well-established vendors have seen more than two or three iterations of SRM, or something similar, with each of their major customers. But how do procurement teams leading SRM convince them that their programme is different?
Stephen Duckworth is head of supplier relationship management for the Cabinet Office, which is leading a Strategic Supplier Relationship Management (SSRM) initiative across the UK’s central government departments. The government is one of the largest clients to many of its suppliers: total contracted spend sits at around £49 billion. Many suppliers have been working with the government for years, and have seen different strategies adopted in an effort to improve relationships with the market come and go.
“Government doesn’t have the strongest reputation when it comes to managing relationships with suppliers, although we are finding some areas of good practice within departments.
Working in collaboration with suppliers to drive efficiency and improvement, to innovate and create more valueadd, has been talked about a lot. However, it’s clear in practice we are not as strong as some other clients of our suppliers,” he says.
Overcoming scepticism
“We have to ensure that we follow through with our plans. This kind of message has been given to suppliers before, and an element of fatigue can set in: ‘here we go again,’ they think. You need to be very cognisant of that,” Duckworth says.
The Cabinet Office is working on the first wave of its SSRM programme with stakeholders within some of the government’s largest spending departments: the Ministry of Justice, the Department for Work and Pensions, Her Majesty’s Revenue & Customs, the Department for International Development and the Department for Transport.
The programme is designed to support those departments through the process of setting up an effective SRM by firstly understanding their current practice and level of maturity, building additional capability where required, and then rolling the approach out with five strategic suppliers, Duckworth says.
Working with State of Flux and consultancy 2020 Delivery, the Cabinet Office is helping each department conduct a Voice of the Supplier study, an internal SRM review and develop a value proposition for SRM relevant to its own goals and operations. The goal is then to segment suppliers and identify which to start working with in detail, conducting a 360-degree review of the relationship and developing a value proposition specific to each supplier. They will then identify ‘value release’ opportunities and create joint business plans, he says.
Value specific to each supplier
“Our programme is not just about general SRM; it is about a focus on strategic suppliers in each department. Because we believe in that, we decided to support departments through funding and finding a partner, in State of Flux, to focus on the largest spending departments and trial it with five strategic suppliers to each,” Duckworth says.
But bringing stakeholders from departments on board was only part of the challenge, Duckworth says. Suppliers, too, have to be convinced there will be something relevant for them in the value proposition.
“We spend a lot of time developing a compelling value proposition for SRM and it’s important this is shared with the supplier. We need suppliers to feel genuinely involved and incentivised and therefore the value proposition needs to work for both parties. Once the suppliers see what we’re trying to achieve, then the misgivings that this is another cost cutting exercise, or the worries that this is not going to go anywhere, start to subside. We take ownership to ensure we act on the things suppliers want to see happen. We don’t expect the transformation to happen overnight. We are in this for the long haul.
We know that if there is to be transformation in relations between government and strategic suppliers, it will be built on delivery of things that work for both parties,” Duckworth says. Addressing change through SRM Government contracts with strategic suppliers are invariably medium to long term, and it’s not unusual that over time some misalignment between evolving operational needs and the contract start to emerge. Effective management of supplier relationships can help address this but it demands a good connection between commercial and operational functions and the supplier. We believe this can be brokered by SRM, he says.
“Trying to bring many strands of the supplier relationship together and articulate why we’re trying to do this in a way that gets the entire department to buy in is an area we need to focus on and it is a challenge,” Duckworth says.
“The Cabinet Office does not say where the value lies, this needs to be determined by the department involving both the commercial and operational functions and of course the supplier.
We have to make sure that is built into what we are aiming for. If SRM is seen as only being of benefit to certain factions then it will not gain the department and supplier-wide support necessary for it to succeed.”
Despite the pressure on government departments to stay within tight spending limits, the primary goal of the SRM programme is not to reduce costs, he says. While this is always welcome, the programme’s primary aim is to minimise risk and maximise operational performance improvement under suppliers’ contracts. That comes not only through actions on the suppliers’ side, but also in departments interactions with suppliers.
Driving value and reducing risk
“Like most SRM programmes we have set our sights on finding incremental value; to see what else we are missing. We are looking for innovation to drive value and to reduce inherent risk in some arrangements. We are talking about strategic suppliers in complex arrangements.
To reduce risks, they must be better managed by both parties. Improving the nature of relationships can ensure problems are discussed earlier and resolved more quickly. We believe if both parties see a return in value, then the contract will perform better. We might expect some savings from the programme, but it is not about reducing the price of contracts,” Duckworth says.
In addition to working with each department to advance SRM programmes for their strategic suppliers, the Cabinet Office also runs a Strategic Partnership Programme for the largest common and critical suppliers across government. These aspects of SRM are linked. Where the department has chosen a supplier to work with on SRM, that is connected to the Cabinet Office’s partnering programme.
“During the second phase of the programme, the Cabinet Office will introduce its SRM governance model to five more departments, starting early next year. It will run in parallel to the first phase which will continue into 2019 when the programme will begin to accrue tangible results”, Duckworth says.
Improving the nature of relationships can ensure problems are discussed earlier and resolved more quickly. We believe if both parties see a return in value, then the contract will perform better.
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