Zurich finds SRM successes amid competing procurement priorities. 
Plans for SRM can look beautiful on a whiteboard, but few organisations get to start with a blank canvas. Global insurance firm Zurich has found that in adapting to its changing procurement landscape, it can get the SRM message across.
Procurement outsourcing has many benefits, but there are downsides. One of them is a difficulty in establishing good relationships with the most important suppliers, says Jaime Paiva, Zurich Services regional head of sourcing and procurement for Europe the Middle East and Africa.
Six years ago Zurich, the global insurance firm, decided to outsource the majority of its procurement, but this operating model is coming to an end. “What we found was we gained more capacity in sourcing, negotiating and making deals, but lost in the relationship. That was for us a big disadvantage in the outsourcing model: you don’t have a dedicated person dealing with the vendors and have limited capacity to facilitate and orchestrate SRM,” he says.
While the move to in-source procurement could offer a greater focus on supplier relationships, the transition itself makes introducing a global SRM programme difficult, as does the decision to move to a new global source-to-pay tool. “Faced with so much change, it would be easy to set the SRM programme to one side, but we decided to introduce it more subtly, using people as its greatest advocates.”
Paiva joined Zurich six years ago, having made SRM a big part of his earlier roles. As Zurich moved to in-source its procurement provision, he saw the opportunity to help the insurance firm benefit from better supplier relationships.
“Relationship management was not ignored, but it was performed by the business in intuitive ways. But when meeting with critical suppliers, we found we did not have internal processes or a structured framework to have consistency across the group,” he says.
Bringing in benchmarks
To better understand the group’s SRM performance, Paiva worked with State of Flux to benchmark their work against other firms. “I was not surprised to see that we were scored as immature. That did help us to set up a roadmap to plan which areas we would like to tackle,” he says.
Zurich could not invest in a single SRM system across the group, because it was already changing its S2P system. Likewise, training was on-hold until it recruited an in-house category management team. “We made the best out of the conditions.
We did not put SRM on hold; instead, we took a pragmatic approach to have a framework set
up and allow category managers to become evangelists for SRM. We were not trying to force the process on these teams but trying to progressively educate the business on best practice in supplier relationships,” Paiva says.
Paiva took care in deciding where to implement an SRM framework first, since he did not have a mandate to enforce SRM across procurement. In areas of supply critical to the business, such as IT or process outsourcing, there were already strong supplier governance models in place, so introducing a new framework could be difficult. But SRM promised to improve performance in the claims organisation; companies which adjust losses on the insurer’s behalf or service providers such as automotive repair companies, for example. Because these businesses form an important part of customer's experience, Zurich saw them as strategic, he says.
“We did not run the formal segmentation, but we were asking business managers for their view on the strategic suppliers, and claims vendors came out of that. We had started receiving concrete suggestions how to improve services to our customers, how some of our competitors worked and how other suppliers worked in the market and that helped us not only to look at the supplier but also the whole category, with a very different understanding of it.”
Stakeholders take over business-as-usual
Although procurement built the structured SRM framework and worked with stakeholders in mapping the relationship to the contract and the desired strategy, it was business managers who would use the framework and take responsibility for supplier relationships, Paiva says. "We hosted the training and moderated a kick-off process, but when it moved to business-as-usual, that was handed over to the business to manage the relationship. Procurement might own the SRM process but it’s the business that has to assimilate the framework and the practice.”
Gemma Stewart, head of vendor, market and spend insights, led the first introduction of SRM in the UK claims team and its relationship with claims vendors. She found stakeholders were looking for ways to improve performance.
“They were very keen to enhance what they did. There were a number of different approaches to managing relationships and a lack of communication and transparency between companies. There was not a common governance structure. No one knew how to reach for innovation or solve problems with vendors,” Stewart says.
She says that a 360-degree review of the relationship with key suppliers revealed their concerns about working with Zurich. Although suppliers were keen to help build a new relationship, they wanted to address aged debt, where they were kept waiting for payment on work already completed.
“We tended to expect a lot from the supplier but did not always understand the difficulties they were having in working with us,” Stewart says.
These suppliers and Zurich claims managers developed joint business plans following the 360-degree review, while procurement provided advice and ensured meetings were booked. Stewart’s team ran workshops with both stakeholders and vendors and followed up to make sure everyone was comfortable with the process. Responsibility for day-to-day management of
relationships, within the framework, has been  handed back to the stakeholder teams. Stewart says procurement will replicate SRM across several global categories including professional services, marketing, real estate and facilities management. But it is a gradual process.
SRM becomes element in recruitment
Progress on SRM is hampered by the technical transformation to a new P2P supplier and the insourcing of procurement skills following the end of the outsourcing arrangement. But SRM skills will be part of the job requirements as Zurich recruits more procurement professionals
in category management roles, and in the long term they will become responsible for supplier
The procurement team is also using SRM as a way to improve relationships with critical suppliers where the relationship is seen as degraded, with positive results. In total, Zurich is now running ten SRM programmes globally.
Competing procurement priorities can make it difficult to implement all the recommended phases of SRM. But Zurich has found using people as the foundation can produce results, and provide a platform for future success.