CASE STUDY
CALTEX
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The world is changing. People are talking about the fourth industrial revolution, autonomous and electric vehicles are on the rise, and the sharing economy is growing. We are looking at what these changes mean for us at Caltex and we are making some significant changes as a result.” Johanne Rossi Caltex Chief Procurement Officer
The programme will also help the company manage its progress through long-term macro-trends, she says. “The world is changing. People are talking about the fourth industrial revolution, autonomous and electric vehicles are on the rise, and the sharing economy is growing. We are looking at what these changes mean for us at Caltex and we are making some significant changes as a result. We want to tell our suppliers about where we’re going and what we’re looking for from them along the way,” she says. DRIVING INNOVATION THROUGH COLLABORATION The suppliers able to contribute to Caltex’s progress through these challenges will see a shift from adversarial supplier relationships focused on price, towards a collaborative approach to help the businesses innovate at a faster rate. Rossi says: “As we shift our mindset beyond cost reduction, we need to formalise the process of how to create value and innovate together. For this, we’ve developed strategies to guide relationships with our key suppliers for generating innovation and creating competitive edge.” As such, the management and processes of SRM need to be embedded within both procurement and the wider organisation as a normal part of daily practice. For Caltex, SRM is not an exercise in reaching procurement objectives; it is a means by which it achieves business goals.
“These events allowed the senior members of our organisations to create relationships that help the businesses get closer and showcase to the rest of our organisation the commitment of our executives to the SRM programme,” Rossi says. BUILDING SUPPORTING PROCESSES AND TOOLS GRADUALLY Caltex has also built processes and tools to support SRM. It started small, with 15 key suppliers and has built its processes incrementally as the SRM programme was accepted by the business and its suppliers. It employed a supplier segmentation methodology, an SRM charter and a supplier relationship strategy. In terms of technology, it used The Hatchery – Caltex’s online ideas and collaboration workspace – to ask suppliers how it could “make the 2017 supplier forum the most anticipated event of the year”. This was a test of Caltex’s understanding of how to use a collaboration platform. The programme has already resulted in some quick wins. Working with a retail logistics supplier, Caltex examined both parties’ value chains to find activities that could be combined across some of the supplier’s customers. The result was a reduction in the supplier’s overall operating costs, a benefit that was shared with Caltex. “Working together with key suppliers has created value for Caltex. This is real. It’s incredibly rewarding to see how the programme we launched, in 2016, has moved from idea to reality. We now have evidence that working together creates more mutual value than going it alone,” Rossi says.
The second element of its strategy is the launch of Catalyst, its supplier relationship management programme. “The Catalyst programme aims to create more transparent and closer relationships with important suppliers to deliver value from untapped areas that traditional procurement can’t access,” Rossi says. Caltex launched the new procurement vision and the SRM programme at its first supplier forum in May 2016. The programme is designed to create mutual value for suppliers and Caltex. From the procurement team’s perspective, it is not about managing suppliers’ performance and squeezing margins. From the suppliers’ side, it is not about more sales pitches during meetings or selling products or services at non- competitive prices. “Suppliers who do not align with this purpose will be removed from the programme,” Rossi says. “We want to be in a situation where we know the market well, from talking to suppliers, being more curious and more externally focused. We also understand pricing through cost modelling and we choose our supply partners well, so tendering activities are reduced if not removed,” she says. ENGAGING THE ENTIRE BUSINESS STARTING FROM THE TOP Caltex’s new procurement vision represents a significant change and requires leadership sponsorship. To demonstrate this level of commitment, both internally and to suppliers, it launched the supplier executive event, a quarterly gathering of top executives from its 15 key suppliers and the Caltex leadership team, which may include a site visit or a roundtable discussion, followed by drinks and dinner.
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78 CASE STUDY STATE OF FLUX
2017 GLOBAL SRMRESEARCHREPORT
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