STATE OF FLUX
2014 GLOBAL SRM RESEARCH REPORT
CASE STUDY 39
GOVERNANCE APPROACH
SUPPLIER NUMBERS
ANNUAL SPEND COVERAGE
STRATEGIC
>£40million event value
CORE
Full iProcure rigor deployed for appropriate top tier suppliers
Top 500 Suppliers fully evaluated
Cirica 85% coverage
>£25million event value
COMMODITY
>£5million event value
Area specific guidance agreed & deployed, to ensure procurement
GMD
BIO UNITS
EUROPE NAM INTER OPS
IS & ENABLE
OPEX
42,000 suppliers (approx)
activity achieves appropriate levels of supply chain governance for each business unit
Cirica 15% coverage
WE ASKED JOHN TO EXPAND ON THESE ATTRIBUTES OF SIMPLIFICATION, FLEXIBILITY AND FOCUS A LITTLE. JH: : I believe fundamentally that a process should be as simple as it can possibly be. Most organisations have to accommodate any new activity with existing resources. In AZ, supplier management tasks are the responsibility of procurement or business based practitioners whose capacities are limited. Therefore, AZ’s revised process has to support users to identify and deliver key tasks as efficiently and effectively as possible, without adding any unnecessary complexity. AZ is a large and complex global business with operating units, functions and people who have different needs. We realised that to effectively embed a single, standard, global way of working across this diverse network, it would have to have inherent flexibility built into it. This flexibility then enables the procurement practitioner to be both responsive to business needs and maintain compliance with the spirit of iProcure. Importantly, this then enables them to maintain strong relationships with important suppliers and the support of their key stakeholders. Ultimately, users need the framework to quickly guide them to make informed choices about what is the best approach for them, their stakeholders, their suppliers and AZ. As I mentioned, this new approach to supplier management is being delivered by people who are already busy and available resource is scarce. Therefore, it makes sense to prioritise and focus that resource on the supplier relationships that will make the most difference to our business.
Q: DID YOU FIND YOU HAD TO REDEFINE SRM? JH: No, I don’t think we had to redefine supplier management, neither in terms of what it meant to us nor the activities contained within it. What we did do was redefine how it would be applied through more effective supplier segmentation and increased focus and prioritisation. Consequently, this means supplier management can now be more effectively applied where it has the potential to add the most value. Q: WHAT DO YOU CONSIDER WAS THE MOST IMPORTANT PART OF YOUR REVISED APPROACH, APART FROM MORE EFFECTIVE SEGMENTATION? JH: I think defining the right governance model for our prioritised suppliers was the logical next step. In doing so, the model had to set clear expectations of what is needed, while remaining relatively simple and flexible. This meant difficult choices around when a supplier would be in scope; with a new threshold for inclusion being set for contracts over $5M, which was a significant increase on the previous threshold of $250k. We combined this spend evaluation with a category criticality assessment to give a combined spend and criticality output. This refocusing enabled us to successfully identify which relationships were the most important to us and how we should try to manage them. So, to a certain extent, it has meant going back to basics in order to build a solid foundation from which we are now looking to deliver more value with these suppliers.
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