Telstra

Telstra is a big name in Australian telecoms, but it has ambitions worldwide. By improving the way it manages relationships with its global suppliers, it is boosting business growth and performance.

In procurement, helping keep business costs down is an important priority. However procurement teams must also support the business to expand sales and grow revenues. Supplier Relationship Management (SRM) teams can play a vital role in helping businesses manage both priorities, as Telstra has discovered. 

Telstra is Australia’s leading telecommunications company, offering a full range of communications services and competing in all telecommunications markets. In providing these products and services, Telstra’s direct and indirect categories account for A$10bn ($7.5bn) external spend, managed by a 150-strong procurement team.

Georgina Portelli, general manager, supplier relations, says: “It is not enough to approach procurement with a traditional ‘cost-saving’ mind set. At Telstra we need to focus on maximising our relationships with our suppliers to meet our customers’ expectations, which often requires partnering with suppliers to develop new products or services.

“These are complex relationships and we are looking for more innovative solutions that we can take to market together and use to drive revenue,” she says.

While Telstra is a household name and is well known by local suppliers in the Australian market, it is also seeking to develop relationships with suppliers that operate on a global scale.

Big fish, bigger pond

Telstra doesn’t enjoy the same familiarity in the global supplier market as it does in Australia, says Portelli. “We wanted to improve how we manage relationships with global suppliers. It is a case of preparing ourselves to compete on a global scale.

“To get better value from our supplier relationships, we needed to work in a new way. Fortunately, support for our new approach came from the top.”

Telstra therefore started to look for ways to cut complexity and remove duplication in the way it was dealing with suppliers.

In 2014, then CEO David Thodey distributed a paper that described how procurement leaders needed to adopt a more strategic focus to help the business to grow. It prescribed better relationships with key suppliers and promoted new ways of thinking.

“We were doing a good job managing the operational and tactical side of things, but we wanted to focus on the strategic side. Like most procurement organisations we are asked to do more with less, but we needed to focus on ensuring we were able to realise a benefit from a supplier and sustain those benefits.

“We wanted to take the relationship approach to managing suppliers and use it to open the door to innovation and mutually beneficial growth. That’s the Holy Grail of procurement,” says Portelli.

Growing business ambition

It was a move designed to support the company’s transition from a traditional telcommunications provider to a global technology company and would set out the way forward in managing supplier relationships.

“Before we introduced SRM, we might have different people across the business discussing different contracts with the same supplier and they were not always coordinated,” says Portelli.

Telstra surveyed 180 stakeholders to better understand how the procurement function could add value by developing their SRM capability. It then built a framework for how the SRM program would be put into practice.

Portelli took over responsibility for the programme in February 2015 and hired State of Flux to help implement it. Together they tested the methodology and introduced a pilot. After a short review, the final SRM programme was launched in July 2015.  

More coordination

The aim was to incorporate the top 100 strategic suppliers in an SRM programme within two years. Telstra is currently ahead of schedule after engaging 68 suppliers in the first year. SRM is now transitioning to a centralised function within procurement, Portelli says.

The idea is that instead of having, say, 10 different meetings with the same supplier across the business, the SRM unit can oversee a smaller number of meetings with agendas that focus on how the two parties can add value to the relationship.

“When we talk to our business stakeholders we can show them we’re here to make life easier and to get an outcome more quickly.

“I know how hard it is to catch up with suppliers to ensure we have monthly cadence for KPI management. After you close the deal, it can fall by the wayside. Being a full-time function has helped us improve our approach,” says Portelli.

The introduction of the SRM unit has also met with some challenges.

“As a traditional procurement function, there was some reluctance to hand over the relationships. To overcome that we needed to build trust. We are not trying to undermine existing relationships. It has been a real measure of success for the programme that people now understand the importance of engaging suppliers at the right time and with the right information to drive the right outcomes.”

A change in mind set

The move towards a more structured approach to SRM is also changing the perception of procurement from a function that is only focused on cost saving, to one that works with suppliers and stakeholders toward business goals.

“SRM needs to challenge the traditional procurement model. If you are not aligned with the business, stakeholders and their objectives, you are not going to add any value,” Portelli says.

In Telstra, the new way of thinking about procurement is already delivering benefits. Around 10% of the department’s savings targets have been met by increased revenue. The message is clear. Not only can SRM save money; it can help businesses grow.