Partnership boosts buying power

With a buying power of more than AU$3 billion, Australian retail group Narta is an innovative solution to a geographic problem. Its next step is to manage supplier relationships. As a procurement person you know that you’ll hit diminishing returns. You might get smaller fraction of saving next time and so on. The results so far have been extremely successful, but it will not be sustainable to keep running a tactical process.

Businesses in the same sector are natural competitors. They would do almost anything

to gain an advantage over each other. However, when they face the same problem, it makes sense to come together as a group.

The remoteness and size of retailers Australia and New Zealand can make it difficult for them to obtain competitive prices from international suppliers. Founded 54 years ago, the National Associated Retail Traders of Australia, was designed to address this problem, using the buying power of its members to leverage deals from global markets. Six years ago, it branched out into buying indirect goods and services for its members.

Jen Barclay, Narta head of procurement, says: “With traditional buying models you are limited to your individual organisational spend; through collective sourcing you have greater opportunities to deliver value for your organisation, leveraging off total group spend and be a larger customer in the market. Essentially you go from being the little fish in the pond to the big fish in the ocean.”

Beyond tactical procurement

To build a buying team capable of delivering value from indirect categories, Narta formed a partnership with State of Flux, which conducted a pilot in 2013 and formed its own buying team on behalf of Narta. In 2016, the team became fulltime Narta employees.

The approach has been successful. In the last year, the Narta procurement organisation has tended AU$300 million and saved around AU$80. It has achieved around a 30% saving in indirect spend for its membership. But it cannot rest on its laurels.

Barclay says: “As a procurement person you know that you’ll hit diminishing returns. You might get smaller fraction of saving next time and so on. The results so far have been extremely successful, but it will not be sustainable to keep running a tactical process.”

To move beyond tactical procurement, Narta Has implemented an SRM framework to increase value to members & suppliers through key enablers: governance, technology & risk management to continue increasing the value it gains from its suppliers.

Turning plans into actions

Narta has appointed a relationship manager to improve policies and procedures relating to the management of suppliers and be a champion for SRM with all stakeholders. But the plan is to build on SRM as it exists in the member organisations and the work Narta has already done. “We’re not adding in another SRM tool, but utilising the tools that we’ve already got. Most people are doing SRM; they just don’t call it SRM. We already have a lot of information on suppliers; it’s about taking the elements that you’re already doing and putting them into processes.”

Aside from appointing a dedicated SRM manager, Barclay also developed roles and responsibilities for SRM as part of a Raci process (which asks who should be Responsible, Accountable, Consulted and Informed about a given process) across the whole procurement team. This covered tendering to ensure all stakeholder requirements go into the sourcing event. The idea was to create a standardised process that could capture more value without taking more time.

She also worked with suppliers to create standard terms and conditions across Narta. Here, the association’s buying power worked to help smaller members who were moved from 14 or 21-day payment terms to a standard 60-days, making a huge difference to working capital, says Barclay.

Greater value and engagement

But Narta is planning to extend SRM beyond improving existing processes and alignment with suppliers, to increase value to members, she says. The Australian government is introducing its 2018 Modern Slavery Act, with reporting that comes into effect from 1 January 2020. Although many of its larger members have already started work in this area, Narta is introducing a paper explaining the Act and introducing a standard sourcing process that will ensure all sourcing meets the minimum requirements.

Narta is also introducing six-monthly “sourcing meetings”, two-day events during which senior representatives from the preferred indirect suppliers come to explain the latest advances in technology, goods and services and sustainability programs”It gives smaller members access to strategic meetings with major suppliers that they would not be able to have in their own right. Yet another example of how using our scale and scope puts us in the top tier of customers with our supply partners”

“We want members to be engaged but we don’t know whether that’s happening. The event is to help members understand what’s new in suppliers businesses, whether that’s new processes, expanded service offering, or changes to their source Manufacturers to ensure ongoing sustainability and meet regulatory requirements. This is a way for us to know that engagement is happening, because we are driving it and are maintaining it,” Barclay says.

Narta faces a particular challenge in engaging stakeholders with SRM, because some of the member organisations also have procurement teams who may have their own SRM programs. We must therefore ensure we are aligned in our plans and travelling in the same direction and not causing conflict between processes.

Supporting Procurement Teams

“They know what they’re talking about. We need to make sure that we have the right plan in place to be able to manage those relationships. We have a two-pronged approach to managing a successful procurement programme. You have engagement at all levels and on all sides. You have your suppliers who are engaged, because they’re getting the volume that you’ve committed, and members are engaged because you’re delivering on your commitments through best in class procurement and providing value through the collective sourcing model,” Barclay says.

The challenge for Narta’s SRM is to ensure its processes are fit for its member organisations, whether they are big or small. As such it allows members to use as much or as little of its procurement services as they want, and not replace their internal expertise.

Listening to members and stakeholders

“If I’m speaking to a member category manager for marketing, and I’m helping to buy print services, they probably have a passion for that category. The challenge is to add value to them without doing any harm. We are here to do as much or as little as anyone needs us to do. With some members, they don’t have a procurement team, and we do all sourcing for them. Others will say, ‘we’re going to use you for tactical activities only’. Others will say, ‘Okay, I’ve got three people, I could have five people, but I’m going to use you instead of hiring another two’.”

“What we need to make sure of is that we’re listening to the members, and we understand what they need and that it’s bespoke. It’s a trust thing for me. If you don’t have the trust of that procurement team, that you are there to help and not to take over, the whole process will fail,” Barclay says.

Narta’s SRM journey is in its early stages, but it has the backing from the top of the organisation. CEO Michael Jackson says: “Collaboration is at the centre of what we do. Not only do our shareholders and members benefit from strength in numbers to gain pricing effiencies for our customers, but also leverage our scale in the market to deliver valued services. Together we continue to form new relationships with various supplier partners ensuring market leadership and continued longevity. We know in the future, SRM will increase its role in our strategy and boost value for all our stakeholders.”

Narta is continuing on its SRM journey. With complex demands coming from the variety of member organisations, its procurement team hope to show how effective stakeholder engagement is one of the cornerstones of success. Through a framework aligned to the specific needs of multiple businesses, the program will grow and change as the membership base does. However, the key pillars will stay the same: Value beyond savings, partnership growth, risk & compliance management and continuous innovation through operational leverage.

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