Successful new programmes like SRM can attract stakeholders looking for the latest techniques to improve performance. But Mars shows careful governance is necessary to ensure SRM maintains momentum and fulfils its potential for supplier innovation in the long term.

As one of the world’s largest privately owned businesses, Mars Incorporated, is proud of its reputation for ethical business. While it spends billions of dollars on products and raw ingredients, across its chocolate, petcare, food, drinks and other business units, it aims to live by its five principles: quality, responsibility, mutuality, efficiency and freedom. The combination should make it massively popular with suppliers, so it was a disappointment when Mars found many of them did not share this image of the company. 

A voice of the supplier survey of Mars’ top 200 suppliers, representing 80 per cent of its external spend, revealed how they felt. “Our suppliers said we don’t listen, we don’t make decisions quickly and we are not working to mutual benefit. Given that being mutual is one of our principles that was disappointing. It was not where we wanted to be,” says Mark Phillips, supplier performance relationship management programme lead at Mars. 

Suppliers as a source of innovation

Defining and developing a supplier relationship and a new performance-management approach was not only important to meet company values, but also critical to future business growth.

“We recognise that our top line growth will also need to come from working with suppliers that offer innovation. It is not just better relationships for no purpose. We are a consumer-based organisation and we want to leverage external innovation through the right partners. What is critical is that resources are constrained: we cannot have an open innovation pipeline. You have to take care in choosing who you work with and define how you work with them in more detail. You can only do that by becoming a customer of choice to the right suppliers,” says Phillips.

As well as meeting these business goals, Mars also wants to help suppliers work towards environmental and ethical goals. For example, Mars is dependent on dairy products for chocolate and proteins in pet foods. But dairy is a massive contributor to global warming. “In the commercial function, we are wrestling, not just with price, quality and cost, but also our desire to protect the planet. We need to create a business that is sustainable and ethical,” he says.

Speaking to the big consultancies

Mars’ revealing supplier survey was part of its programme to improve supplier relationships and performance to help meet the challenges in innovation and environmental and ethical goals. It started by looking for a partner among several of the world’s largest consultancies. While their research offered strategic insight, it lacked sufficient detail in understanding the full breadth of Mars’ thousands of suppliers, Phillips says.

However, Steven Brunner, Mars’ indirect procurement vice president and chief procurement officer, discovered State of Flux through activities with Procurement Leaders, the global procurement community and magazine. 

“We’d never looked at a smaller boutique consultancies previously, but what State of Flux advocated, with its surveys and insight, seemed to resonate with us,” Phillips says.

Phillips came into Mars’ SRM team from a background in project management. Working with State of Flux, he began to define the Mars SRM programme.

“We know Rome wasn’t built in a day; we needed to address the challenge in sensible stages, so we started by defining what our version of supplier performance and relationship management needed to be,” says Phillips.

Relationships before procurement

The SRM team encouraged stakeholders from the commercial function to think about the relationships with suppliers from the beginning of the process: from analysis of the market to sourcing, rather than after deals were done.

State of Flux helped to segment Mars’ suppliers to see if they presented a transactional relationship, which can be managed based purely on performance, or a strategic relationship, which requires mutual investment to deliver value.

Testing the concept

Developing this theory was phase one of the project. In phase two, Mars worked with State of Flux to develop a pilot programme that it implemented with key suppliers and stakeholders. It carefully selected stakeholders by finding those with a passion for the project who could put forward suppliers they thought they could work with best. It then identified if the resources were available to put towards for project and came up with a list of six suppliers to invite to a formal introductory session, supported by State of Flux.  

It was a while before the penny dropped with some suppliers, says Phillips. “One supplier took until 2pm on the first day before saying: ‘Mars is serious about this, isn’t it?’ The head of commercial replied: ‘Yes, this not business as usual, we are going to change.’”

Nine months into phase two of the project, the project is overcoming any initial scepticism. It is starting to see enthusiasm from stakeholders in different regions, which the project team is having to manage. Part of the governance is to ensure early peaks of enthusiasm do not detract from longer term goals.

“Some see it as a shiny new object and will be keen until another one comes along,” Phillips says. “We have to temper that enthusiasm. Rather than saying ‘no’ we say ‘yes, be part of pilot, as long as you bring two suppliers in from your business region and provide incremental resources to invest in the relationship.’

“In the meantime, our business units have been asked to continue to focus on developing and then executing brilliant category strategies that take into account our full business and stakeholder needs, and also reflective of the external business environment,” Phillips says.

Building the technology

Mars is also supporting its SPRM programme through the piloting of new software. Although it uses SAP Ariba strategic sourcing solutions across the business, Mars is evaluating State of Flux’s Statess solution to test its more detailed functionality built specifically to support SRM processes. Mars is looking for a technical solution that supports the full performance and relationship experience between customer and supplier.

It’s a significant undertaking. Mars is a huge organisation, with sales of $33 billion, more than 77,000 employees and 11 or more brands worth more than $1 billion. It has a 1,200-strong commercial team. The SRM team will be rolling out the pilot for at least the next 12 to 18 months before it evaluates the benefits and plans the final delivery phase.

At this stage Mars is reluctant to put a savings target on the pilot. Nonetheless, the SRM team has learned a lot since the project began.

“When we started, we knew we needed something, but we did not know what it was. Now we know we should focus on the critical few suppliers, rather than ones everyone thinks are important. Part of challenge is to help the organisation recognise we need to be constantly making that choice. To do that you have got to change the sourcing mind set,” says Mark Phillips.

To Mars, SPRM requires an understanding of the supplier’s point of view, an approach to segmenting the suppliers able to innovate in the right areas and a governance process that guides stakeholders in the way they manage suppliers. The scope, breadth and ambition of project demonstrates how important SRM is in supporting Mars’ growth.