City of Melbourne

City of Melbourne
Just get in there and do it
 
Within months of establishing an SRM programme, the City of Melbourne says it has benefitted from closer working relationships with suppliers.
Every Labour Day weekend since 1955 the City of Melbourne has come together to celebrate Moomba. A four-day long carnival held along the Yarra River that attracts millions of residents and visitors to watch events including live music, parades and the birdman rally. Working with suppliers to stage the annual festival is just one of its responsibilities. In addition to running events such as this and a New Year’s Eve fireworks display, it also partners with providers to help protect some of the community’s most vulnerable people.
 
"Our 3,000 suppliers are a diverse group, covering everything from large capital works programmes and the operations that keep the city functioning, to running childcare and community centres and delivering big events,” says a spokesperson.  In addition, it procures technology, business and professional services, so any SRM programme had to cater for all.
An SRM professional lead, who works in the Procurement and Contract Management Branch, was brought in at the end of 2018 to develop and deliver this programme - the final piece of the puzzle for its overall procurement transformation. 
 
Prior to the SRM programme, the organisation had operated a decentralised contract management approach. It had contracts with suppliers that were managed by one of its 35 branches or business units that report to the executive.  “The challenge was to consider how we could holistically manage all suppliers in a way that was scalable, consistent and fit-for-purpose, depending on the relationship with that supplier,” the spokesperson says. 
 
As part of that, it looked at developing a more targeted SRM programme with strategic suppliers or those that it wanted to establish a strong partnership with.  And while it remains new, this programme has already reaped benefits.

 

Establishing SRM

The first stage was to consider what was already in place. The City of Melbourne had previously only segmented according to spend rather than also considering risk, complexity or other factors. The team wanted to examine the base in a number of different ways, so it looked at its top 120 suppliers, comprising about 80% of spend, and segmented them to determine who they wished to partner with more closely.
 
“We realised some of our most strategic suppliers weren’t always those with the largest spend. Some are critical because of the services they provide to the community - such as child health services and support for people experiencing homelessness.” Once it was clear who the key suppliers were, a four-tier governance arrangement was set up to consider how to manage them on an ongoing basis. That oversight was organised into six pillars: risk, innovation, contract and commercial management, performance management, governance, and financial management. 
 
It then built suitable tools, templates and processes for each of the six areas and considered how technology or automation could assist contract managers to maximise these relationships.
 
At the same time, it developed a more holistic supplier management programme for its thousands of other suppliers.  “The aim was to ensure the right level of governance, process and rigour was in place for the entire supply chain." 
 
Different levels of time and effort were required across its diverse pool of suppliers - on-boarding everyone from highly sophisticated global players to small providers without experience of requirements, such as business continuity plans.  It needed a tailored way of dealing with each type of supplier for the programme to succeed.
 
Once it was established, the City of Melbourne next considered reporting mechanisms. It set up information dashboards so the executive group and stakeholders could understand the value of SRM for both the organisation and the wider community.

2020 SRM report | Supplier management at speed  

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Challenges and progress

Some suppliers were resistant to changes that meant being judged on areas not previously assessed; while others were relieved the City of Melbourne was establishing these measures.
“There was some amount of pull and some push back.” One challenge was that suppliers were typically secure in their arrangements. “We have a history of long contracts that are continually renewed, so some suppliers have tended to be quite comfortable, while others have been hungrier for the business," says the spokesperson.
 
Another challenge was to get key, strategic suppliers set up on the programme within six months without any dedicated in-house resource to do the additional work. This was an extra role for commercial portfolio and category managers, with mixed experience, to perform. Professionals in the centralised procurement function were put through intensive State of Flux training so they could “speak that language around SRM within the team and wider organisation”. The next stage was training for 40 staff to help deliver the benefits of the programme. The organisation hopes to have a source-to-contract tool in place some time this year to automate many SRM activities and manage them consistently for suppliers.

 

Meanwhile, a lot of the measures have been about formalising processes and procedures. “For instance,” says the organisation, "we’ve collected performance data in the past but we were sporadic in how we managed it. Where suppliers provide multiple services across the organisation, we’re now able to pull all that data together.” And performance was the first thing it focused on. Next was supplier risk management, for which it developed a separate framework and looked more deeply at its supply chain. Then it moved on to governance, financial and commercial management, as well as innovation. “From a journey perspective, we’re part way through. SRM continues to evolve all of the time,” says the spokesperson.

The level of governance depends on the type of supplier, with strategic suppliers subject to a greater level of management.“We’ve put a lot more emphasis around our expectations, and innovation has become a more formalised and robust process. New ideas are funnelled through to see which will fly,” they add. And the current situation with Covid-19 is expected to drive innovation in a different way. “A lot of organisations are looking at how they structure themselves internally - what the working structure is and how to deliver services. Everything has been shaken up and is being reimagined, so we’ll start to see what comes through.”

Return on investment

Progress on the programme was suddenly interrupted by the coronavirus outbreak, although the time and effort invested has already proved invaluable. "At the start of the pandemic, it was next to impossible to get your hands on hand sanitiser,” says the spokesperson. “One of our bigger suppliers for example, couldn’t get them to us and we realised we weren’t considered strategic to them. Meanwhile one of our smaller providers, an Aboriginal-owned company that supplies a lot of our branded items, told us they had a massive shipment coming in. They told us that because of the development work we’d done with them to build our relationship, as well as the fact that we were a people-facing organisation, meant we had first refusal on these products. "Hearing that we were being put first was huge for us.” This was still at the point that there was a constant flow of people visiting the city’s Town Hall, libraries and community centres. “We had a real responsibility to get back to the supplier quickly about precisely how much sanitiser we needed so that it could get the rest out to other customers. It also meant we were able to help supply our own providers, such as the Salvation Army who do a lot of work with people experiencing homelessness. In the end, we procured 10,000 face masks and 15,000 hand sanitisers.”

As services such as libraries and recreation centres temporarily closed, the City of Melbourne was able to redeploy many of its casual workers into employment at one of its cleaning suppliers. "It shows a true partnership - coming together for the benefit of everyone to keep the city clean." The city advises anyone pondering the merits of an SRM programme to stop delaying and get one underway. "The main thing is to just get in there and do it. There are so many reasons not to even start, but we’ve demonstrated that you can do it - even with a pandemic in the way. If anything, SRM is enabling us to get through it rather than being an extra burden.”

We’ve demonstrated you can do it – even with a pandemic in the way – if anything, SRM is enabling us to get through this

For further information on how we can help your organisation SRM programme, please contact us at enquiries@stateofflux.co.uk and to find out more about State of Flux technology, request a demo here. 

Download 2020 SRM report - Supplier management at speed

 

 

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