Royal Mail
Contract management delivers sustainable results for Royal Mail
Royal Mail has existed in one form or other for 500 years. While this longevity helps it understand how to sustain operations in the long term, it has been subject to rapid change in the last five years.
The UK postal service, originally established in 1516, spends about £2.3 billion across 5,000 external suppliers. After centuries of public ownership, the
service was privatised in 2013.
Following the move, the organisation embarked on a strategy to gain greater visibility of supplier performance through better contract management, laying the foundations for organisation-wide supplier relationship management. Although organisations most often choose to apply SRM to gain value, through innovation, process improvement or savings, Royal Mail has found it a challenge to scale past a handful of suppliers. So instead of pitching for the ultimate SRM goal, the procurement organisation first decided to build stronger foundations and improve how it managed suppliers’ performance against their contracts.
Suppliers: an extension of the organisation
Royal Mail’s CPO presented the proposal to the organisation’s risk management committee, to make the case that better contract management would improve oversight, ensure compliance with regulatory and corporate social responsibility obligations and reduce value leakage.
The risk committee gave the programme the go-ahead in 2016. Procurement led it but retained the operating model that hands over day-to-day management of contracts and collection of data to the business units. Royal Mail runs 24-hour operations, so it made sense to leave contract management in the hands of those working closely with suppliers around the clock.
Because the programme would apply to a large number of suppliers and contract managers, it
was rolled out in three waves, learning from each phase as it progressed, says Helen Wilber, Royal Mail SRM programme lead.
The procurement team set out a training programme: Contract Management Essentials, to ensure contract owners were working from the same level of knowledge. Face-to-face workshops took place in London and Chesterfield, which the business supported with Skype training. The training resulted in the added benefit of creating a contract management community across all business units.
Rob Cooksley CPO says “Suppliers are an extension of our organisation. How they behave and operate is important to us. As CPO, I need to ensure across all our key supply chains we are delivering first class value for the business and protecting it from risk. The Contract Management Essentials programme has given me confidence that we are achieving that for our business.”
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A community of contract managers
“No one had created a contract-management community that cut across our operations, from fleet management to HR before. It’s good to see learning work across business units,” Wilber says. In terms of technology, Royal Mail deployed the contract management module from State of Flux’s SupplierBase solution. The procurement team developed a common score-card structure to
help make supplier performance measures comparable across the business, including value
for money, quality of work and the health of the relationship.
The programme was managed by one full-time equivalent role, and a part-time strategic manager, with support from procurement, stakeholders and State of Flux. Legal, compliance and risk teams also contributed.
“Contract management was not new to us: there were pockets of good practice, but not all areas were doing it consistently,” she says. In addition, the standard measures and easy access to data made oversight of key contracts easier for the executive team. For the first time, they were able to compare suppliers with each other and get a fact-based, objective view, she says.
“Suppliers know they are being tracked and measured against one another and that is driving
their performance. It has been well received by suppliers. Because we are tracking them, and they have access to the portal, they can use it to understand their performance by pulling down data each month,” she says.
Greater visibility of compliance
Other benefits include tracking supplier compliance with Royal Mail’s security standards, anti bribery policy and monitoring compliance with 2018’s General Data Protection Regulation for suppliers that process Royal Mail data. The system also helps monitor supplier performance against the Royal Mail Responsible Procurement Code which sets out expectations for corporate social responsibility in the supply chain, Wilber says. Initiatives tracked via the portal include the rollout of electric vehicles to the fleet, and compliance with the Modern Slavery Act 2015, particularly among higher risk sectors including suppliers of catering, cleaning and uniforms.
Royal Mail prioritises suppliers based on their importance to the business and level of risk. The procurement risk register lists the risks that are deemed critical to the business and supply chain.
Using the contract management system to identify suppliers with a high sustainability risk, Royal Mail then undertakes mitigation activities, such as enrolling them on the Suppliers Ethical Data Exchange (SEDEX), an online platform that tracks environmental, social, and ethical governance performance, including through third-party audits of these suppliers. Royal Mail’s approach to supplier management has seen recognition in the shortlist for Best Process Improvement Initiative at the Chartered Institute of Procurement and Supply annual awards.
The groundwork for SRM
Progress in contract management is also set to lay the groundwork for the implementation of supplier relationship management at Royal Mail, Wilber says.
“We have attempted SRM before, but we tried to do it without getting building blocks in place. We have looked to work with our top ten suppliers using SRM but then found it was not scalable. It was seen as something we were doing to the business, and not involving them in it. There was no collaboration with them. Now we have their input in contract management, we get engagement, and that has made it a success.
“What we have delivered with the programme is unprecedented within Royal Mail transparent, visible, consistent contract management reporting across all our key supply chains. Getting the foundations right is fundamental to the success of effectively managing supplier relationships,”
Wilber says. With a sound platform for contract management, the Royal Mail procurement team is demonstrating that it can deliver results at an enterprise level, providing the business with assurance on supplier risk, performance and sustainability that modern multi-billion pound businesses need.
For further information on how to refresh your supplier performance management approach and to learn about SupplierBase, State of Flux technology, please contact us please contact us here or at enquiries@stateofflux.co.uk