18 March 2010

Orange’s first supplier awards marked the culmination of a year-long scheme set up at the telecoms business to develop supplier relationship management.

“My vision was simple,” says Allison Ford-Langstaff, director of sourcing and SRM at Orange. “I wanted to create a programme that demonstrated and communicated our understanding of our supply base. And I wanted it to show, through tangible business KPIs, how buyers working alongside internal stakeholders bring about value.”

In late 2008, the director of communications, content and professional services sourcing also took on responsibility for SRM agenda at the telecommunications firm.

Previously, Orange had managed many of its individual relationships well but there was no consistency across categories and no overall strategy. Here’s what they did, and how.

FOUR STEPS TO SUCCESS

Orange designed what it called the ‘SRM pathway’, setting out four steps it needed to take – segmenting the supply base, supplier performance measurement, strategic relationship management, and continuous improvement.

It wanted buyers to have complete responsibility for the sourcing process, so it created a small team dedicated to SRM to move things forward.

In February 2009 Rachel Scarrett, who was formally head of category for marketing sourcing at Orange, was appointed head of SRM. Having a sourcing professional lead this new team was a deliberate move to ensure SRM had a genuine practical application and “did not remain darkened room theory”, says Ford-Langstaff. Although many academic studies had been conducted on SRM, the team found that few organisations had turned theory into practice with tangible benefits.

1. SEGMENTATION

 The first major undertaking was to ensure the supply base was segmented so Orange could allocate resources to deliver the most value. This was already done to a certain extent but was predominantly based on its spend profile. The SRM team developed a tool for buyers to review suppliers which took

into account other factors, such as business risk and opportunity. Stakeholders were also included.

The company now reviews its segmentation annually, with a checkpoint every six months to ensure market alterations are accounted for.

2. SUPPLIER PERFORMANCE MEASUREMENT

Next, it had to find a way to measure supplier performance: a journey Orange describes as “fairly painful”. It developed a scorecard covering quality, responsiveness, environment, delivery, innovation and cost, but underestimated how difficult it would be to get such a large group of buyers to alter the way they measured performance at the same time.

Previously, each sourcing team had its own means of measurement based on what best suited that particular supply base and stakeholders. Through “stealth and an unbending belief”, Orange says, it managed to phase in its standard performance measurement programme starting with marketing and professional services, customer equipment, then networks and IT. This staggered approach meant the process could be tweaked as issues arose.

The initial training was a great start but buyers needed ongoing support from managers and the SRM team to set targets, calculate the results and draw enough insight from the scorecards to set meaningful action plans for continuous improvement. In late 2009, the scorecard became an in-house built online tool called ‘iScore’. This system allows buyers, stakeholders and suppliers to set, record and report performance data direct in to the system as well as provide action plans and other useful intelligence.

3. STRATEGIC RELATIONSHIP MANAGEMENT

Orange says it already had excellent internal relationships with business stakeholders but there was still room to act in a more joined up way when managing suppliers.

Using the new segmentation as a base, the team created a method which set out the type and frequency of meetings held and the appropriate level of performance measurement. This governance applies to anyone working in the company who works with a supplier - even the executive team. Having one view of a supplier enables it to manage the relationship better and feedback from vendors has been very positive.

4. CONTINUOUS IMPROVEMENT

Ford-Langstaff admits this step is still in its infancy but at its heart is ensuring buyers are equipped with sophisticated tools and techniques to carve out long-term value.

Orange launched in-house training for buyers in late 2008, with the focus on getting the basics in place. In addition, the company aims to pilot a small number of joint initiatives with selected suppliers with the objective of creating value. This could be through elimination of waste, joint development projects, shared intelligence or early access to innovation.

Ford-Langstaff says Orange’s sourcing organisation and its suppliers are both a strategic asset. It provides a learning opportunity for people in sourcing and the chance to shout about suppliers who have made an outstanding contribution to the company. 

COMMUNICATION

The right communications plan was essential to allow the SRM transformation to take place. In addition to training, guidelines, meetings and workshops, a team of SRM champions was created to put in place consistent best practice across the business.

“This was to ensure the SRM team did not become another ivory tower, full of theory but easily ignored by the buying teams,” says Ford-Langstaff.

A representative from each of the major sourcing categories was chosen to work with Scarrett as part of their buying role. Not only do they ensure new initiatives are fit for purpose, they also use their influence with peers to sell the benefits, and provide knowledge and training.

Scarrett adds: “The concept of an SRM champion is simple but the benefits have been significant. It would be easy to make incorrect assumptions about how categories operate. The champions work with me to ensure we have a fully informed debate. Likewise, buying teams have a spokesperson.”

Like many sourcing functions, Orange measures savings performance but the SRM programme now gives facts on supplier performance and the financial contribution SRM makes. This is reported quarterly to the executive team and means sourcing can demonstrate what SRM delivers – so far, incremental savings of 23 per cent. As the UK comes out of recession organisations that have invested in SRM will reap the benefits of much greater rewards – making the most of their relationships with suppliers to create ongoing value. And Orange believes vendors that have been supported through this period will see them as a customer of choice in the longer term.

SRM Awards

Supplier excellence programme

Outstanding performers

Rewarding supplier performance was an important milestone for Orange’s SRM programme. It officially acknowledged the part suppliers have played in their success in 2009 by running the awards event and issuing honours (based on the results of its ‘supplier performance scorecard’) for innovation, delivery and customer relationship management.

The award for innovation was won by TNT Post UK for its “outstanding contribution to a number of initiatives”, which stimulated new savings opportunities and demonstrated excellent relationship-building skills to boot. Charles Neilson, group commercial director at TNT, says: “Some larger clients have supplier conferences but very few engage with us in this way. We are delighted our ‘Sure we can’ philosophy has been recognised with this award.”

Virgin Media Business scooped the prize for delivery. Orange says it “demonstrates an immense level of passion and proactivity”.

Brendan Lynch, director of wholesale markets at Virgin Media Business, says: “We have been collaborating with Orange for many years to build and support its core network. We understand this network is business critical and have ensured that the necessary focus and resources are deployed.”

The award for customer relationship management went to Keane, which Orange says consistently scores over the norm.

Ian Miller, executive vice-president at Keane EMEA, says: “This honour is a testament to the relationship we have with Orange, built on a strong foundation of collaborative behaviours, sustained delivery quality, and continuous alignment to Orange’s business goals. Our relationship has evolved from a simple supplier-customer engagement, to a strategic partnership where we are assisting Orange in reacting to market changes and demands.”

Ford-Langstaff says the awards created excitement and healthy competition, with a diversity of nominations ranging from global to local players. “We strive to attract and retain the best people. Our SRM programme is designed to complement that across our supplier base.”