Ladbrokes faces the challenge of extracting more value from a niche set of suppliers. It finds technology can help SRM gain the support of stakeholders and achieve long-term benefits.

Leading UK betting and gaming firm Ladbrokes has hit its £18 million three-year savings target 12 months ahead of schedule since beginning its SRM transformation in 2014. But for that success to continue, it must not be treated as a one-off programme, insists head of procurement Liz Cockburn. 

“You can’t just run it once and walk away. You have to keep going. It is a very iterative process and involves reinforcing the same messages to the same people. You need to walk the talk and not let it go, otherwise people naturally drift off and go back to old behaviours,” she says.

Cockburn and her procurement team were confident that savings were ripe for the taking because of the nature of Ladbrokes’ supply market. The betting and gaming industry relies on a narrow group of suppliers and Ladbrokes pays around 70% of its external indirect spend of £350 million to between 45 and 60 suppliers. As such, there is limited scope for competitive tendering and it soon starts to show diminishing returns, but procurement can still find savings and other sources of value through a more cohesive approach to working with suppliers and better management of the relationships with them. 

Niche industry suppliers

“We’ve invested heavily in SRM because a lot of the suppliers we deal with are very niche to the betting and gaming industry. There is nowhere else to go, so the relationship is critical to delivering services to the consumer,” Cockburn says.

But Ladbrokes had taken a fragmented approach to these suppliers. “We had lots silos talking to the same vendor in different ways,” she says.

The executive board supported procurement’s new approach to SRM, but to succeed the programme needed backing from managers further down the hierarchy, an altogether greater challenge, says Cockburn.

“We had the executive buy-in to be more joined up. Where we struggled was the next level down in management. They asked, ‘Why does procurement need to be involved? We’ve been doing this ourselves for years.’ That was the challenge. We believe that, for Ladbrokes, SRM should be done in the business; however, it is still procurement led. If we were not, it would fall away again.”

Ladbrokes engaged State of Flux to build a framework to improve its SRM capability and also conduct a Voice of Supplier study to help understand how Ladbrokes was perceived as a customer by its most important suppliers. The consultancy set out a more consistent and joined-up approach to managing critical suppliers and a more formalised assessment of risk in the supply base.

It also created an SRM handbook that defined a way of working and offered a selection of tools to improve dealings with suppliers across the business. An important element of this new approach was the implementation of an SRM technology solution to enable more effective and efficient working with suppliers and internal stakeholders.

Mandating SRM for the business

Supported by senior management, Ladbrokes’ procurement team mandated that all the relevant stakeholders had a plan for SRM and a framework for meetings and governance. It measured risk and performance of suppliers using the State of Flux technology platform, Statess. A more recent development has been to start working with the Statess innovation module, although it is yet to implement this across the business, Cockburn says.

The gaming firm also used the information it had gathered via the Voice of the Supplier study to understand how it is seen as a customer and how it might unwittingly add to suppliers’ costs or inefficiencies. It held two supplier forum events to help them understand the new way of working.

“We learned a lot about how suppliers see us and we were sometimes surprised by the response. For example, we thought our decision-making process was pretty good, but they did not,” says Cockburn.

Commitment to communications

The new approach to SRM has been well received by suppliers, she says. “It demonstrates that we are committed to the relationship and to communication. We’ve run two supplier events where the executive presented the business case and plan for SRM. We’re showing we’re investing time and money in talking to them and that we’re willing to do it on a regular basis.”

Some examples of early tangible benefits for Ladbrokes started to flow. It was immediately able to save money. It saved on energy costs by converting to LED lighting across its estate, working with its facilities management supplier Mitie through a new deal. It also employed brokers to buy electricity at a low point in the market.

Other deals include commodity purchases such as mobile telecoms. While Ladbrokes took 30% out of these costs by a competitive tender, a more collaborative approach with incumbent suppliers enables them to renegotiate deals without going to tender, achieving a £142,000 spend rebate with its main print provider by awarding it more business. A similar £300,000 rebate came from its main IT services supplier by contracting helpdesk services to the vendor.

SRM technology eases acceptance of new processes

But to continue to save the business money requires procurement to maintain the focus and continuously reiterate messages, says Cockburn.

“We are working alongside management just to be that voice on the shoulder to remind them about executive reviews and relationship management plans. We are making sure that the discipline is in place. It is a bit of a nag, but they get it and are happy that they are involved rather than procurement running it without them,” she adds.

The technology is helping to get stakeholders on board with SRM, says Cockburn. “The software was easy to get up and running. It is helping procurement show how to manage the key suppliers and in the future we will make more use of it and give it much more life.”

Cockburn says there is much more to come. Procurement will continue to reiterate its message and the business will continue to manage supplier relationships to create future savings and broader value. For an organisation that met its savings target a year early, it shows Ladbrokes understands the value of a long-term commitment to SRM.