By Susan Avery
With 85% of spend under management, the Procurement and Supplier Management team at SunTrust Bank certainly adds value to the Atlanta-based financial services company. Analysts consider this level of Procurement performance to be best-in-class. Still, Brad Douglas, Senior Vice President, Procurement and Supplier Management, is working to enhance the team’s effectiveness.
That’s because the team faces some big hurdles. One is staying ahead of technology advances as SunTrust adopts new applications for its customers. Another, which is familiar to most procurement professionals today, is managing expenses in this recovering economy.
“Not to take anything away from Procurement--we have a very experienced team with reach into every element of the business including some very nontraditional areas such as Human Resources and Legal--but we are making refinements to reduce cycle time and to be more aligned with the bank’s lines of business, focusing on deals that require more complex negotiation, Douglas says.
To address the need to reduce expenses, Douglas looks to the team to work with the bank’s lines of business to manage demand and consumption levels, perhaps looking at ways to change some ways it does business. They’re also looking at opportunities to outsource some non core activities under strict service level agreements (SLA), metrics that could help further improve performance.
“In many cases, reducing costs is not a matter of going back and renegotiating a better contract, because for the most part that’s been done”, says Douglas who took on the leadership role at SunTrust Bank a little less than one year ago after working as the first State Chief Procurement and Administrative Officer for Georgia Governor Sonny Perdue.
Strategy: A Playbook
To manage a spend that consists of such categories as technology--computer hardware, software, services and support; professional services; legal services and data processing--Douglas and the Procurement team use an annual playbook. To develop the tool, they work closely with the bank’s lines of business. Together they select projects for the year that help the businesses better deliver on their mission.
“Procurement helps them think through some projects,” Douglas says. “We get the businesses at that very premature and early point to estimate opportunity to lower cost.” The playbook tracks the progress of the projects.
At the same time, the team maintains an Ariba e-procurement system called Sun Mart. Using data on spending generated by the system, the team built a data mart that provides analytics on spending it shares with the lines of business. “We’ve been able to refine that information to give them an accounting-type view of spending,” Douglas says.
That broad view, which resembles a P&L statement, provides data on aggregate spending, spend by supplier, and, even, individual transaction and price paid. “That level of data allows the business to get its arms around what it buys, and, then, pull a lever to lower demand, decrease consumption and/or rationalize the supplier base,” he says. This level of detail is available for all spend categories.
A procurement team with 85% of spend under management has greater opportunity to drive value and save more money than teams at other organizations, said Andrew Bartolini, Managing Partner and Chief Research Officer at Ardent Partners at a My Purchasing Center Expert Access event in November. These teams have high compliance rates, enabled more of their suppliers and have less maverick spend, he said.
The Procurement team at SunTrust Bank, in fact, has been delivering savings of $50 million or more for each of the past three or four years, Douglas says. “Our value is providing spend analytics, doing the number-crunching, understanding the marketplace and knowing the margins. We bring all this to the business.”
Procurement’s value also lies in some basic fundamentals such as supplier selection. “When you go through a hard and impactful savings initiative like we’re going through now you look for suppliers with whom you can actually partner,” Douglas says, offering as an example the bank’s relationship with a printing supplier. The supplier provided Procurement with information to help reduce the number of custom-sized envelopes used by the bank.
“The supplier does that knowing that ultimately it could result in less revenue for them,” he says. “But they see the benefit of Procurement viewing them as a value-added partner and that we are going to remember them for that.”
An equally important criteria in the supplier selection process is the supplier’s financial stability, says Shawn Dockery, First Vice President, Strategic Sourcing. “We look for suppliers that are going to be around to support the bank. Reliability is critical to our operations.” Dockery has 16 years of Procurement experience with Home Depot and GE Energy-Nuclear.
Currently working on a contract with the bank’s office-supplies provider, Dockery who has responsibility for several spend categories is leading efforts to reduce office-supplies demand by creating a pens focus group to rationalize the number of writing instruments available to employees. He asked users from across the bank to test and select the pens that ultimately are going to be included in the contract. “We told suppliers that these are the only pens we are going to buy and to give us their deepest discount,” he says.
The Procurement team encourages suppliers to come forth with new ideas in the negotiation process, quarterly business reviews and through relationships with the lines of business.
To lower consumption, the Procurement team has created a website for the bank’s employees to post office supplies they no longer need that others may be able to use. Also, Dockery is examining ways to optimize the bank’s distribution processes for supplies.
The Supplier Performance Management team also reporting to Douglas has segmented its supplier base into three categories: critical, collaborative and functional. Working with the lines of business, this team determines which suppliers are critical; these suppliers receive intense scrutiny from supplier managers. IBM is an example of a critical supplier to SunTrust Bank. Collaborative suppliers also receive intense scrutiny, but from the lines of business. Couriers are considered collaborative suppliers. For all others, the team is putting in place a process for monitoring performance more consistently.
SunTrust’s Supplier Performance Management team recognizes superior supplier performance at an annual supplier summit held in February. “In a very public forum, senior management gives suppliers an award in the spirit of partnership,” Douglas says.
Susan Avery is Editor-in-Chief at My Purchasing Center. She writes articles, blogs and white papers and manages and creates other content for the online procurement and supply management publication. She produces and moderates roundtable discussions, podcasts, webcasts and video interviews. Susan has 30 years experience covering procurement and supply management for Purchasing magazine and Purchasing.com.
George E. Krauter
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