RSA Insurance Group
Global insurer RSA (formerly Royal & SunAlliance) has implemented a successful SRM programme over the past three years and is reaping the rewards.
Jamie Napper, Global SRM Excellence Manager, explains its philosophy and approach.
After successfully reducing the number of suppliers in our UK business from around 3,000 to 300, RSA decided that a formal best-practice mechanism was needed to support the post-contract aspects of sourcing. A review of our global capability and maturity in these areas found that while the average level of sourcing capability was high, the associated SRM capability was weaker and ran the risk of not being able to deliver the benefits negotiated into the contract by the sourcing team.
Our SRM programme started in the UK business and 120 suppliers were identified to go through it initially. About 80% of these were on the 'indemnity' side of our supply chain – that is to say, suppliers providing services to our insurance claimant customers. The reason was that opportunities for improved service and cost reductions appeared to be far more achievable in this area than in our expense-based supply chain, as this category includes the expenditure these suppliers incur on our behalf in handling customers’ claims.
The key concept within our SRM initiative is 'relationships', and a real focus has been given to ensure that the softer benefits of creating positive and productive relationships are recognised alongside the harder financial benefits. This approach is clearly aligned with RSA’s corporate brand beliefs and lends itself to a more open and collaborative way of engaging suppliers than the performance management and cost-driven SRM concepts we had seen in other financial services companies. It also recognises that each of our suppliers is unique and needs to be treated as such even when we are using generic tools and practices to manage our relationship with them.
To create a framework around which these tools and practices could fit, the '7 pillars of SRM' were devised:
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The hygiene factors - These are the simple things that need to be in place before we start the SRM journey. Is there a contract? Are payments made on time? Do we have meetings, management information and other governance items in place?
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A basic service guarantee - Are we getting what we pay for? Is the service acceptable? Have requirements moved on and / or do services need to change? Are we preventing the supplier from providing their best? All these questions are asked to ascertain the level of performance being received, to provide both a view on issues that may need fixing and a baseline for improvements we may undertake.
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Benefit delivery - The purpose of SRM is to deliver, among other things, reduced costs. This approach should benefit both the supplier and RSA. This aspect relates to the need to develop cost-efficiency initiatives to generate these win-win situations. Workshops and training sessions on 'lean' and other techniques can be used to establish where we can improve processes and drive out inefficiencies.
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Revenue delivery - Similar to the identification of benefit, we also look to improve revenue for both the supplier and RSA through improved spend compliance and penetration of services, or cross-selling / up-selling of products and services between us.
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Risk management - A critical aspect of the SRM business case is the visibility and control around supply side risk that it brings. Modules on corporate responsibility, IS security, pandemic planning and solvency have all been developed on the programme.
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Corporate responsibility - As mentioned, CR forms part of the risk mitigation approach of SRM, but for the RSA community and environment it is also a key area of our business principles. We treat CR as a separate focus area, therefore, and look to explore opportunities with suppliers that share similar principles.
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Innovation - Finally, we promote the use of innovation in how we engage with stakeholders and suppliers, not only in respect of identifying benefit and revenue ideas, but also in how we manage the SRM programme, and how we behave, engage and develop in this space. Nothing is considered out of bounds.
Each of the pillars has its own tools and training, and a supplier performance management tool was created to record progress against each pillar by each supplier. The programme in the UK was incredibly successful, returning around 6% on addressable spend, and it was therefore decided to expand the programme globally in 2009.
Taking the programme global
RSA operates in 29 countries worldwide with varying levels of market maturity and penetration. To ensure that the successes of the UK programme could be replicated in other countries, without swamping them in process and documentation, a simpler, more flexible and more linear process was developed to support the global roll-out.
This 'ABCD' process allows supplier relationship managers (SRMs) to cover the basics then 'self-serve' from a range of value-adding modules depending on the category and type of relationship they are managing.
A is for ASSESS - First, we undertake supplier profiling and identification of ownership / accountability internally within RSA and also with the supplier. This allows us to assess what we are buying against what we actually want and check there is still a fit.
B is for BUILD - Once we understand who our suppliers and SRMs are, we can take a step back from our existing relationship (good or bad) and review what sort of service we get and what sort of relationship we have. Once we have done this we can look at what service we should be getting and what sort of relationship we (both) want and address the gaps. A suite of tools and techniques has been created to analyse the supplier’s service performance, position, power and risk factors to RSA.
C is for CONTROL - Next, we look to establish and/ or formalise proper relationships with the supplier via formal meetings, 'stakeholder mapping' and engagement, 360 degree feedback, key risk mitigation, development plans and SRM training. This is where the intangible benefits (service and relationship improvements) begin.
D is for DEVELOP - Once we have established an effective service, we can begin to look at opportunities to innovate with the supplier, re-engineer processes and globalise services. The offer of discounted insurance and loyalty benefits for customers is also explored. This is where tangible benefits, in the form of hard cash, really start to be delivered.
Although SRM is not mandated in RSA (something we are working to change), we now have formal SRM programmes operating in five countries with a further five due by the end of 2010 – giving a total of more than 200 suppliers in scope.
Addressing the challenges
The lack of a mandate does mean that the 'sell' of SRM is a continual battle, with a large percentage of time spent around communications and the business case. As the programme expands and the good news stories increase, however, this is becoming easier to manage and we are being approached to adopt suppliers into the programme.
Another challenge we’ve faced is the tendency for SRMs – who generally have an operational background – to revert back to
supplier performance management in times of surge or stress (or habit), such that the focus can become tactical instead of strategic. While there is a requirement for suppliers on the SRM programme to maintain a 'good' level of service, flexibility is also built in as trust is developed to ensure we can always look to the future, providing mitigations are in place for any current failings.
Resources are also a constant battle, as the majority of our SRMs sit within the business and undertake other duties as well. To ensure that we keep our promises to our most aligned suppliers around SRM, a 'platinum' level of supplier is being created. This top tier will benefit from training, invitations to events, public relations initiatives and other value-added offerings.
Indeed, a review of our approach to supplier segmentation has led to criteria including the appetite of the supplier to engage and their degree of alignment with RSA in areas such as culture and corporate responsibility being added to the mix. Crucially, our experience has shown that the largest volume / value or 'partner' relationships don’t actually realise as big a return on investment as the next level down: mid to large-sized 'development' suppliers. Our focus is therefore changing to reflect this.
This refocus should see SRM heading from strength to strength in 2011 and beyond.