CASE STUDY / AIB
CASE STUDY
to measure supplier performance and relationships across the organisation. It worked with State of Flux to review and implement this framework, using a scorecard for each supplier that supported a governance process and helped facilitate the reporting of supplier performance to the bank’s board. Today, Frank Kellett, Head of Strategic Sourcing & Procurement at AIB, which provides a full range of personal, business and corporate banking services, describes how the company's supplier management capabilities have evolved. AIB now has a specialist supplier relationship management (SRM) team dedicated to third-party risk and supplier management. In collaboration with subject matter experts and business areas across the bank, this team has created a comprehensive supplier management process for the onboarding and renewing of third parties. This team continues to work with more than 400 accountable owners of third-party relationships, to help them work collaboratively with their suppliers to achieve contractual value, manage risk exposure and deepen their relationships. “It has now become embedded in our business model,” says Kellett. “The various business areas now understand why it’s required on a consistent basis, so rather than feeling forced, they want to do it.” During a recent survey of the SRM process, one business area head commented: "It has become plain that the benefits of understanding the key risks of engaging with third parties and having a clear SRM structure not only ensures we obtain contractually agreed value, it also deepens our relationship. This is critical for all those who manage third parties.”
process of overseeing suppliers from initial talks to tracking developments in innovation. The bank began using it in 2017 and since then its use of the system has matured as adoption has grown – aided by the support and sponsorship of the chief operating officer. “One AIB strategy is to make things simple and efficient, and from a supplier management perspective SupplierBase has definitely contributed to that,” says Kellett. “It’s easily accessible and able to be audited. It provides a point of reference for anyone who wants information on supplier performance and confirmation we’re doing what we should be. We can use it to attest that suppliers have the certifications they should and it holds details of the accountable business owners and suppliers.” He says the content of monthly internal supplier management calls are now more “enriched” than in the early days, which is vital not only to meet external regulatory requirements but improves internal processes and access to information. This greater formality extends to structures in place to segment suppliers according to their importance and ensure each is subject to the appropriate treatment strategy. “We try to measure everything now,” he says. “While there is obviously a need to ensure we get value from our contracts, it is also essential that we can evidence good supplier management. A lot of what we do in terms of SRM is driven by our Policy and Standards, and because we’re subject to oversight from external regulators. We are frequently audited, which means our records need to be up to date.” Records include whether meetings have taken place, if data has been uploaded to the central repository, and so on. “It contains all that we need, with enriched information that covers contract management including expiries – what has and hasn’t been concluded yet – and maps out the runway for the next year or two so people know what’s coming.” Data and communication is now clear and adoption by the business is obvious because factually there’s “nowhere to hide”. “You have to do what you have to do,” says Kellett, “and now the business areas see the value of doing it. All of the support and templates are in place to help the business and it’s working really well.”
high end now expect this,” says Kellett. This level of capability means the bank can look to its supply base to produce much of the information it requires in the way it needs it to meet governance commitments AIB operates in Ireland, the UK, Europe and US, so is subject to regulations in each region. When inspectors and auditors come calling, the bank can show it has the policy, processes and standards in place to manage its third parties, as well as the evidence that it’s been undertaken. “The maturity and evolution of supplier management is helping to support the business and procurement is showing we have good oversight and structures in place,” says Kellett. “External regulatory inspections go to board level, which means there’s sponsorship from the top to get this right and mitigate any potential risks.”
SYSTEMS AND CONTROLS ADDING DEMONSTRABLE VALUE
Enriched data and a mature approach means supplier management at Allied Irish Bank can support the business with its commercial ambitions.
Risk management
Knowledge of its supply base – where they are located, as well as the relationships it has with key personnel and contact details held on the SupplierBase system – meant AIB could quickly react to support the business when Covid-19 struck. “As soon as the pandemic hit, the bank and board wanted to know what impact it was having on our supply chain,” says Kellett. “Our tiering system and the construct around SRM and who business owners are, meant instead of contacting hundreds of people, we could rapidly reach out through our centralised SRM team to find out what we needed. We were able to respond at speed and didn’t have many supply chain issues as a result.” Kellett says AIB has SRM staff dedicated to supporting the business in the areas of IT, business, and professional services to help bring those areas along on the SRM journey. “There are eight people over the three SRM teams. On top of that there is the hierarchy of business owners,” he says. One change following Covid was the rebalancing of off-shore versus on-shore IT support from 75% provided overseas to a 50:50 approach. In addition to managing risk through improved supplier management, AIB has a formal risk assessment process for new and existing suppliers. This covers cyber security, among other things. “There is a big focus on IT security and tight governance around shared data. There is now very much a ‘go, no-go’ base for suppliers and unless they are at the right standard, they won’t be signed off to deal with the bank.” Kellett says AIB plans to continue to mature its supplier relationship management. Next steps include further development of oversight and adoption, as well as proof that suppliers are acting responsibly (see box out). He says reaching this point of sophistication required top- level support, as well as time and money invested in both the change management and properly resourcing SRM. “C-suite adoption is an absolutely key driver in ensuring successful implementation,” he concludes.
A IB (ALLIED IRISH BANK) has seen first hand the now. In the highly regulated financial services sector it first looked to supplier management to improve compliance, then recognised it could also be used to boost innovation. It has since proven its worth during the pandemic and is now using supplier management to help the business achieve more value and to support the bank’s sustainability ambition. benefits of investing in supplier management for some years
Progress report
In 2014 State of Flux reported on how AIB began to create a framework for managing its suppliers – setting out how
IMAGE CREDIT: JULIEN BEHAL
Supply chain arrangements
The bank has around 3,500 suppliers, with around 2,500 covering transactional spend in its lowest tier (tier five) to about 50 in the top grouping for its highest value or most strategic partners. AIB’s supply chain is predominantly in Ireland and the UK but also contains a small number of third parties who operate globally. Supplier spend is in excess of €1 billion a year, with large IT companies, security and top end facilities management providers some of the largest chunks of indirect spend. As the bank has matured in its approach, so too have suppliers. “Those at the
SUPPLIERBASE IS EASILY ACCESSIBLE AND ABLE TO BE AUDITED. WE CAN USE IT TO ATTEST THAT SUPPLIERS HAVE THE CERTIFICATIONS THEY SHOULD AND IT HOLDS DETAILS OF THE ACCOUNTABLE BUSINESS OWNERS AND SUPPLIERS.
Technological support
Kellett says the State of Flux software platform, SupplierBase, is at the centre of how AIB drives supplier performance and measurement for monthly reviews, as well as its broader SRM activities. The platform helps the SRM team bring automation, ease and speed to the
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STATE OF FLUX
2021 GLOBAL SRM RESEARCH REPORT
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