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LV=’s supplier segmentation process
STRATEGIC Defined as those where the risk profile, business criticality and spend or revenue profile is high, and the relationship is intended to be long term. Strategic suppliers are expected to work closely with LV= to drive out additional value above and beyond that detailed in the contract. Strategic suppliers will be formally managed within the meeting governance framework and will include executive sponsorship. PREFERRED Those where the business risk, dependency and spend or revenue profile is relatively high and likely to increase over time. There is potential for developing the relationship to deliver additional value over time within the meeting governance framework for a select number of preferred suppliers. The majority will be contract managed with guidance from the appropriate supplier manager. APPROVED Those where the business risk, dependency and spend profile is low, and the primary source of value comes from the contract. These suppliers will not be supplier managed. LEGACY Those suppliers that we plan to exit or rationalise where their product or service can be fulfilled by an existing preferred supplier (in support of on-going supplier reduction targets). Legacy suppliers can carry high risk and will be formally managed out of the business with effective supplier management.
› A supplier segmentation model, consisting of a range of business criticality, spend and revenue generation criteria. All suppliers are annually assessed, based upon their importance now and moving forwards, and segmented into one of four categories: strategic, preferred, approved and legacy. The team focused on the strategic suppliers and a select number of preferred suppliers. Formal sign off by business owners to segmentation deliv- ered, for the first time, a complete view of the LV= supplier base from business risk, dependency, cost and revenue perspectives. › An internet hosted technology solution, imple- mented using the State of Flux Supplier Management Platform and connecting key suppliers with their relevant LV= key stakeholders. One environment to capture all service perfor- mance, risk, relationship and cost management content. The build includes an innovation module, delivering a single conduit for the capture of new ideas and innovation.
The CIO supplier management team was created in mid 2011. Led by Keith Bray and reporting into Tom, the near term priorities were to recruit the right talent profile, implement the supplier management framework and connect with the sourcing capability (to deliver end to end accountability), and deliver significant and sustainable value. The first year focused on people to ensure LV= recruited the required breadth of commercial and relationship skills. A dedicated supplier risk management capa- bility was formed, reporting into Keith, alongside dedicated supplier managers to drive risk mitigation throughout the supply chain for all regulatory, financial, information and data security matters. In parallel with talent and recruitment, a blend of good practice supplier management tools and processes were designed. The supplier management framework was built on four pillars: cost, risk, performance and relationshipmanagement. It consisted of the following: › A meeting governance framework with senior executive sponsors, to connect relevant LV= stake- holders for joined up management of the key suppliers. Owned by the relevant suppliermanager, the framework ensures that all supplier commu- nication is facilitated in a cohesive, managed way.
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