Stanwell
Not all experts are receptive to new ideas from suppliers. Energy firm Stanwell broke down barriers by listening for when business stakeholders were prepared to ask for help
Telling someone they might need some help is always a tricky proposition. When it is a procurement team telling engineers that suppliers might know better than them, it can be doubly difficult. That’s why stakeholder engagement is critical to the success of SRM, says Andre Harvey, general manager, procurement and supply, Stanwell.
With coal, gas and hydropower stations generating total capacity of more than 4,000 megawatts, Stanwell posted earnings of AU$857 million in 2018. Although it is one of Australia’s largest electricity generators, the leadership team felt it could get more value from suppliers.
But Harvey was not sure whether the engineering teams who dealt with suppliers day-to-day would be happy to accept ideas from suppliers.
“To start with, you have to acknowledge the nature of the relationship with the supplier. For us, it was more something like buy, implement, and if you’re not happy, complain. It is difficult to get into a conversation because of a level of scepticism on the part of the workforce mainly responsible for managing suppliers. Any innovation would potentially be seen as a challenge to the expertise of our engineers,” Harvey says.
Overcoming scepticism
Where scepticism could have been a problem, Harvey’s approach was to discuss the challenges in the Australian energy industry. It is currently undergoing a transition from a slow-changing industry, to one marked by increased renewable investments, transformation of the energy ecosystem and dynamic market forces. A discussion about industry disruption led to a conversation about where stakeholders felt they need or would benefit from help. That might be whether our competitors were seen as suppliers’ ‘customer of choice’ thus enjoying favourable prices or services; or when other organisations were undertaking dialogue differently with their suppliers; or whether Stanwell was prepared to do this differently.
“Facing disruption alone will see limited successes. We needed to create a space to have that conversation, allowing us to use it as a catalyst for change. When people feel they have permission to ask for help, that gives them more control of the conversation as well as a sense of curiosity,” Harvey says.
After getting agreement to discuss ways suppliers may help, Stanwell worked with State of Flux to road-test supplier relationship management and demonstrate its value to the business.
Not a big bang approach – rather more of an opportunity role model. The next step was to select three suppliers to work with. Harvey’s team picked one supplier of a highly complex product, one that was high risk and one that was high value. Then an open dialogue began to uncover what the suppliers found difficult about working with Stanwell and where the energy firm could improve its performance. Two of these projects have concluded, and one is still ongoing after two years.
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Early progress with these three suppliers was well received by the business allowing the procurement team to work with State of Flux to develop a voice of the supplier survey to sample the supply base of 5,000 suppliers. With around 160 responses, Stanwell began to understand how suppliers perceived the company, if it was treating them well, or if it was not talking to them regularly enough. It wanted to understand on a broad scale what issues suppliers might have in working with Stanwell. This could extend from suppliers potentially having problems with payments and other transactional interactions to if they were getting enough communication about the Stanwell strategy and priorities.
“It was about having permission for a different conversation with suppliers. Not everyone is going to have a strategic relationship or alliance. Some suppliers are happy to be dealt with on a transactional basis, but they want to get paid on time, and we want a quality product. Sometimes you need to have a conversation about that,” Harvey says.
From its sample, Stanwell divided suppliers into five portfolios of mining, generation, ICT, materials and inventory, with a relationship manager in charge of each portfolio.
Success through longer-term contracts
One of the greatest successes came through renegotiating with one of Stanwell’s largest maintenance contractors. The firm had been working on an annual contract, which was rolled over each year. Following the SRM process it became evident that for the companies to work together with more trust and confidence a longer, and deeper commitment would be necessary. With this in mind, both companies approached a review of the contract with the overarching philosophy which says: ‘a contract is an act of community: what’s important for this community to pay attention to so it can gain the most from the contract?’ Consequently, Stanwell signed a four-year contract with the supplier, which enabled it to negotiate a deal that improved supply chain continuity and security while saving Stanwell AU$2 million. Though the real benefits continue to flow at contract engagement and management levels, the operating teams also enjoy a richer dialogue.
“The contract was a key to operations and maintenance. When both organisations truly collaborated to the benefit of the contract, we were able to have a more forward view of what we could do differently. We’re now talking about optimising tasks and processes and having a better conversation around safety. The effect was immediate. The supplier was saying, ‘there were a whole bunch of things we had observed [we could do differently] but felt that we would not be listened to’,” Harvey says.
Stanwell also realised its sourcing, tendering and invoicing processes were impeding suppliers, and they were building these inefficiencies into the contract price. Stanwell helped to secure greater goodwill from suppliers by introducing new tools, including e-procurement, source-to-contract, and procure-topay systems. As well has improving efficiency, the systems can offer up-to-date surveys of transactions and tenders as well as collating supplier satisfaction scores. “The process of buying and procuring will always be present in business. What we learnt was doing it quickly and efficiently; and allowing a space for ‘do-different’, shifted our position to being a ‘customer of choice’ across our supplier community,” Harvey says.
Shifting the dialogue with suppliers
Stanwell is benefitting from SRM, but it is careful not to use the name. Instead, it calls the process ‘key supplier management’. “It is a simple play of words that seems to have connected quite quickly with our managers, SRM is procurement speak we needed a business language,” he says.
Harvey’s team is working through the process of putting contract management frameworks and supplier governance in place to make the key supplier management process more sustainable when personnel shift in and out of the business.
To succeed with SRM in the long term, the organisation needs to get away from the idea that it is a task to complete, Harvey says. “It is not a spreadsheet to be done and then forgotten. Those SRM projects that prosper are those that do something with the results. It gives permission to shift the dialogue with suppliers.”
Stanwell is showing how SRM can help organisations navigate changing industries. But creating the right moment to engage stakeholders was crucial to success.
Facing disruption alone will see limited successes. We needed to create a space to have a conversation, allowing us to use it as a catalyst for change.