When Rolls-Royce set its itself the bold target of becoming the world’s leading technology company it needed a supply chain worthy of the title. Its solution to this conundrum has earned it the overall winner award in the CIPS Supply Management Awards 2019.
With an additional goal of improving its cash position by £1bn and making Rolls-Royce the customer of choice for its suppliers, the company realised it required an approach to procurement that was also bold.
While for many years it had reaped the benefits of category management, year-on-year value improvement at the company had slowed.
Rolls-Royce decided that deeper collaboration with its supply chain could significantly increase the benefits to both itself and its suppliers, and it launched a new initiative.
Determined to steer clear from a one-size-fits-all approach, Rolls-Royce decided to let its direct and indirect procurement teams develop the approach which best suited them and their suppliers.
The key goal, alongside cost reduction and improving supplier quality performance, was to develop trust that would enable both sides to invest in new technology and bring that technology to market, providing all-round benefits.
Direct procurement focused on unifying the cross-functional and supply chain unit teams with a one-team approach.
This covered 100 key civil aerospace suppliers representing around 75%, or £2bn, of spend in that sector. The approach aimed to challenge the usual processes, behaviour and culture and to engage the “hearts and minds” of senior leaders and their teams.
Initiatives included a ‘collaborate, don’t tell’ annual conference aimed at building trust and creating a supplier culture which would accept and act on feedback.
An integrated supplier scorecard and a supplier engagement plan co-created and co-owned by Rolls-Royce was introduced.
This led to a simpler relationship with suppliers, where 40% of metrics had disappeared.
In indirect procurement, a Premier Supplier Group (PSG), chaired and led by the suppliers, was set up with its chair rotating between members every 12 months.
Category PSGs share best practice and visits to suppliers’ key sites allow lessons to be learned through direct observation rather than PowerPoint presentations.
Rolls-Royce believes competitors now often work together for the greater good.
In direct civil aerospace procurement savings of £153.2m were achieved, while the new approach helped to shape Rolls-Royce’s strategy in several areas. In its indirect counterpart the procurement team is now able to deliver at least 5% cost savings each year, with £91m saved in 2018 alone.
Overall savings of more £250m prompted Rolls-Royce CFO Stephen Daintith to declare that the procurement’s continuing creativity in its collaboration with suppliers would be a key part of business’s transformation in the future.
Awards judges noted the company’s “clever thinking and creative solutions to engaging a diverse supplier base”.
Paying tribute to the level of collaboration and the ‘collaborate, don’t tell’ message, judges said: “The result is a transformational change on supplier relationship management and a structural shift in behaviour.”
The winners in full
Ethical procurement – public sector
Sheffield City Council – Ethical procurement: how Sheffield would like to do business
Ethical procurement – private sector
WWF UK – Procuring the leading sustainable facilities management service in the UK
Diversity and inclusion
Barclays Bank – Women in procurement
Jaguar Land Rover – Customer value driven by procurement
Collaborative teamwork – public sector
Ministry of Justice – Re-procurement of the Bail Accommodation and Support Services contract
Collaborative teamwork – private sector
National Grid – iBuy - a customer journey
Cummins – Cummins Innovation Gateway
Department for International Development – Women’s Integrated Sexual Health Programme (WISH)
Astellas Pharma Europe, mySupplierRisk – An Engaging Programme Of Work
GEP and Yorkshire Building Society – Driving Greater Performance, Productivity And Value
Vodafone Procurement Company – Design2cost
Supply chain integration
Jaguar Land Rover – Trading Division Direct Ship
Turkcell – Harnessing The Latest and Innovative Technologies for Digital Transformation Journey of Supply Chain and Procurement
Supplier relationship management
Rolls-Royce – creating collaborative supply chains
Fujitsu – Passport 2 Procure
Procurement Team of the Year – small teams
Formica Group Europe
Procurement Team of the Year – large teams
Jessica Jones, Royal Mail Group
Leader of the year
Patrick Dunne, J Sainsbury
Rolls-Royce, creating collaborative supply chains
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