Uber

Uber

Uber is driving innovation with supplier collaboration

The SRM programme at the company is less than a year old, but it has already resulted in competitive improvements and support for the business through a tough time
What started in 2008 as an idea dreamt up by two friends struggling to catch a cab one cold winter’s night in Paris has grown into a multi-billion dollar global disrupter.
 
Months after that evening in France the two entrepreneurs developed a smartphone app that let people tap a button on their phone to hail a ride using their GPS location. In 2010 the first Uber rider requested a trip across the company’s home city of San Francisco and since then there has been more than 10 billion trips in 500 cities across the world. And the company has diversified into not only moving people, but food and other items; it has moved into the use of driverless vehicles and has ownership of a number of subsidiaries.
 
There have, inevitably, been ups and downs along the way. It has had the highs of rapid growth and financial investment, and the lows of losses, such as those caused by opposition and blockades from the taxi industry. The company is used to adapting fast, however, and today is no different – only this time, it hopes its closer collaboration with key suppliers will help it through its current rough ride and lead to securing future growth.
 
We spoke to Neil Aronson, Global Head of Strategic Sourcing & Logistics, in May, just as the company had been forced to make drastic cuts to secure its long-term health. “It’s been a rough week, no-one is travelling and we’ve had to lay off some good people,” said Aronson, who has been responsible for the global sourcing team since mid-2016. He grew the team from half a dozen to 72 with global category leads based in the US and regional heads in Asia, South America and Europe.
 
The team worked on its supplier relationship management (SRM) framework over the first three business quarters of 2019 and began rolling it out in Q4. “It’s pretty fresh,” said Aronson, “and it was going really well until Covid-19 hit. But we’re still talking to our supply base every day, so it continues to drive conversations and the work we had already done is absolutely making a difference to what we have to focus on now.”
 
The closer collaboration with some of its key suppliers has enabled the business to lean on them for help as it copes with the fall in income. “We’ve had some manufacturing capability that have converted some of their lines for PPE [so it can supply drivers]. And we’ve asked for support given our current lack of revenue, so a lot of our top supply base is actually helping us on cost, without changing scope or resources. It’s been fantastic from a partnership perspective because at the end of the day they want to be around long term so they’re helping us through a tough time.”
 
And Aronson credits closer working with suppliers for the positive successes that have already been achieved. “We’ve seen some innovation on the telecoms side of our business, voice messaging and call and anonymisation has really driven some competitive advantage for Uber. And on the technology side, we’ve built some really cool products – that I can’t go into – but that too has really given us a competitive advantage.”
 
He says the formal programme is resulting in the right level of engagement and investment from some of the key supply base the business already had. “Some suppliers come to you proactively, but for the most part we find SRM drives the right conversation. It gives them an insight into where we’re going, which enables them to have tailored conversations with their leadership team to go after the right dollars to help fund things.”
 

Why SRM was needed

Uber was already a big name, but rather than rely on simply leveraging from the value of its brand, it knew there were more gains to be made. “There are five key components to why we need SRM at Uber,” says Aronson.
 
  1. To increase collaboration with suppliers
  2. To support strategic relationships
  3. To provide more visibility to stakeholders
  4. To establish an ongoing way to evaluate the supply base and its performance
  5. To drive innovation in order to achieve a competitive advantage for Uber.
“SRM is critically important to long-term success. If we don’t track, grade and engage with conversations and quarterly business reviews then there’s no visibility and suppliers will go off and do their own thing.
 
“This brings the business, suppliers, sourcing and the supply chain together to make sure we’re on the right track and looking at things in the right way. We’ve had no issue getting some of the top supply base to be providers to us. They like the SRM programme because it gives visibility to leadership and they also get insight into what we’re thinking and where we’re going as a company. That helps them reshape and think about their strategy too as to how they can support us. It’s been a win-win.”
 

Segmentation and engagement

Uber, which has around 25,000 active suppliers, began by splitting the supply base that covered Logistics, Professional Services, Real Estate & Construction, Technology and Marketing into four tiers: Strategic, Leverage, Tactical and Bottleneck, and started by focusing its first efforts on the top tier strategic suppliers who are critical to Uber’s competitive advantage. “There’s a high potential for that group to really add value to Uber in terms of long-term profitability and helping us to grow our business.”

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Before the coronavirus pandemic erupted, the team had also begun work on the second tier –those in the leverage category of best value providers that offer a mid-to-high level of potential to add value. ‘Tactical’ covers more commoditised parts with standard specifications.
 
Meanwhile the ‘bottleneck’ tier receives attention because it covers those suppliers who provide the company with limited sources of supply. Uber also pulled apart its top supply base to consider anything over $25k and determine which tier it sat in. The team then had stakeholder meetings to review the list of suppliers in each of category to achieve their buy in before producing a scorecard for each. “It resulted in five key elements for each scorecard,” says Aronson. “Quality; Cost; Delivery; Strategic Alignment & Innovation; and Additional Capabilities, but with tailored questions according to the category.
 
“We then got alignment from each key category lead and began rolling it out and had already had performance reviews with some of the top tier one suppliers.” The type of review the business conducts, its frequency and level of detail, depends on the nature of the provider.
 
“We have many suppliers in our ecosystem globally, so one size does not fit all.” It conducts three types: Business Review Light; Business Review; and Strategic Relationship Reviews.
 
“Anything less than $1m is in the Business Review Light category, unless it’s critical to our business,” says Aronson. “Between $1-10m and we will do Business Reviews and anything over $10m we look at from a strategic standpoint.” Supplier surveys are also carried out in the round and have uncovered some surprises. “Some ‘Aha!’ moments would be the disparity with regard to how we view a supplier and how they view themselves. Usually they view themselves in a lesser light than we do, so they’re harder on themselves from a grading standpoint.” It oversees all this with a tool that it was already using for sourcing, projects tracking and savings, which is accessed globally by his seven-nation team.
 
“It helps us scale and make quick changes,” he says. “If I want to make an alteration, I can do it in a template and it goes across all the relevant categories.” Despite the slowdown in formal SRM work following the outbreak of the disease, Aronson says the business continues to evaluate the supply base on an ongoing basis. “Especially now with Covid-19, we do financial health checks repeatedly for the top supply base. “I’m sure our strategies will change as we see how Uber comes back in the market and people start travelling again and what that means for our business long term. We’re pretty flexible and nimble, we have to be. I don’t know what the future will hold, but whatever it is our suppliers will be key and we’ll adapt our programme accordingly.”
 

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