Ungated: 2023 SRM Research Report - Extended Enterprise

2023 GLOBAL SRM RESEARCH REPORT

CASE STUDY: DISCOVER FINANCIAL SERVICES

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Supplier segmentation Procurement was also keen to have better oversight of all its most significant supplier relationships, so this year set about segmenting its supply base. It was aware that some of its biggest categories (tech and data providers, cloud services, and marketing agencies) are managed by a number of contacts across the business and it wanted a holistic view. “We needed a way to identify our most important relationships, so we implemented a segmentation methodology that evaluates spend, risk, relationship complexity, and our reliance on that third party,” says Thomas. The procurement technology team built a tool to pull data from multiple sources and reveal its 100 most strategic suppliers. The plan is to put more intentional structure and rigour around how those key relationships are managed and identify which could provide the most value - and then pursue improvements and innovation together through joint account planning. “The next step is to uncover our true partnership potential. We will be open to sharing more information to help them better support us in our goal to become the best consumer digital bank and payments provider, and to feel incentivised to do so. We want to maximise what we’re getting and figure out how to build mutually beneficial relationships.” Thomas’s team is also undergoing some benchmarking with other companies in the financial services sector and beyond to share with them the work it has done with suppliers and learn from others. “We’re using our professional networks to share our journey with other companies who are perhaps slightly less advanced, as well as absorb best practices from those who are more experienced.” Reaction and response An internal survey of stakeholders, as well as State of Flux’s Voice of the Supplier research, helped the supplier management team to understand what change was required. It created the impetus for establishing the resource library and training for colleagues, as well as the focus on how to boost supplier relationships. Thomas says third-party providers have responded positively to the structure and governance it has put in place because it enables them to perform better. “We are managing performance more closely, as well as working with suppliers to create action plans and provide information to help improve performance where it is needed.” Discover has been busy laying the foundations required for its supplier management to go from strength to strength.

“ It’s easy to overlook, but a lot of value can be achieved in how suppliers are governed and managed,” says Thomas. “We ’ re only three years into our supplier management journey and we ’ ve made a ton of progress and quickly implemented a lot of best practice. “Our suppliers are part of our extended enterprise: Our third party relationships play a huge role in our ability to deliver the products and services that our customers want in a compliant manner - and that makes it so important to place the right level of attention on how they are managed.”

5-10% 10-15%

Strategic suppliers - managed by Enterprise Supplier Management (ESM) Essential suppliers - support available from ESM

30-40%

Operational suppliers

Sustainable steps Over the past 18 months, Discover has put a significant focus on its own ESG - environmental, social, and governance - journey . In addition to being Head of Supplier Management, Michael Thomas also leads the company on Business Diversity, which is a core component of its ESG strategy. He is helping the company to use its platform of products, jobs, and supplier spending to advance equity. Discover operates 100% US-based customer services teams. “One of my favourite quotes is that ‘talent is distributed equally but opportunity is not’,” says Thomas. One change after Covid was to consider some of its physical footprint with a focus on equity. This led it to open centres in two historically disinvested areas that could house world-class customer service teams in half of the building, and a community centre in the other. This has had the dual effect of providing jobs as well as a facility that could be used by community- based groups. “The team has taken a hyperlocal focus to identify small and diverse-owned businesses in the area to support both the initial buildout and ongoing operations of these facilities,” says Thomas. Almost three quarters (73%) of the money spent on building the first community centre was with local minority and women-owned businesses. “As we go on this journey of community-based work, we want to inspire and motivate other companies to drive lasting change by making the same investments that Discover has made in diverse communities and businesses.”

50%

Transactional suppliers

Internal surveys and other research uncovered a stakeholder appetite for more information and resources to aid them in managing supplier relationships on a day- to-day basis. To meet this need, the supplier management team created a library of resources, including tools and templates covering quarterly business review templates, stakeholder mapping, action plan development and tracking, meeting agendas and minutes, and SLA tracking. “We have more than 2,000 third-party relationships, and our supplier management team is not staffed to manage them all. Where we cannot do the work, we have made our resources and expertise available to help others, and to create a multiplier effect,” says Thomas. “So many of the people who are tasked with managing these external relationships are data scientists, marketers, and engineers - supplier relationship management is not their day-to-day job. We want it to be as simple as possible for them to manage the service they are buying,” says Thomas. “ It ’ s easy to assume people know what we ’ re doing and why; sometimes it ’ s helpful to reset on the ‘what’ and ‘why’, and how it all fits together.” Thomas’ team set up a programme of training divided into five areas. Each voluntary session has been attended by around 200 people - a demonstration of serious interest in developing supplier performance and relationship management acumen. The six sessions covered: Knowing the supplier: Understanding the key stakeholders at the third party and the requirements of contract. Managing supplier performance: Monitoring SLAs; creating action plans; driving accountability; and proper escalation, such that it is constructive for both sides.

Managing the supplier relationship: The importance of alignment between organisations and structured engagement at different management levels. Managing risk and ensuring compliance: Poor performance is a leading indicator of potential issues at the third party. Highlighting the risk associated with failing to properly manage third parties; and increased focus on contract requirements; properly monitoring spend; the opportunity to reduce the likelihood of risk exposure (of any kind) through proper management. Managing contractors: Focusing on the personnel resources third parties provide to Discover. The training helps ensure Discover is requesting the right individuals in terms of seniority and expertise; properly onboarding and integrating them, as well as correctly off-boarding them. The sessions also covered ensuring contractors understand the goals of the team and wider business and how the projects or initiatives they work on support those goals. “We’ve been good at positioning procurement as a strategic partner to the business and bringing them along on the journey,” says Thomas. “We work hand-in-hand with them so suppliers can’t tell them one thing and us another. We sit with our stakeholders at QBRs [quarterly business reviews] to maximise the value of those relationships.” “It’s easy to assume people know what we’re doing and why; sometimes it’s helpful to reset on the ‘what’ and ‘why’, and how it all fits together. ”

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