Environmental Services Firm
Environmental services firm establishes comprehensive supplier qualification processes
The environmental services firm is one of the UK's leading recycling and waste management companies. From refuse collection to recycling, waste treatment to street cleaning, the organisation provides services to nearly a third of the UK's population and supports thousands of commercial and industrial customers.
When the company set out to replace its legacy ERP system with SAP it recognised it was maintaining detail of over 50,000 suppliers, many of whom were never or rarely used. If the procurement team were to improve the management of the relationships they had with their suppliers, then clearer visibility of accurate and up-to-date data was necessary.
Time was spent cleansing the supplier information to remove duplications, errors and many one-time use suppliers. The organisation had grown significantly over the last few years and disparate views of supplier information across 21 legal entities had resulted in data inconsistencies and errors.
Equally important, the organisation needed a systematic way to ensure that supplier information was not only accurate and up to date, but valid - using reliable information would not only help Procurement establish a strategy to deliver a better use of time and resources, but also reduce exposure to supply chain risk.
They wanted to establish a comprehensive supplier qualification and accreditation process to ensure that the auditing of high risk elements was carried out correctly, thoroughly and on a regular basis. Exposure to risks, such as contractors' health and safety processes or liability insurance being neglected, could have very serious consequences in the event of an accident.
The organisation set out to replace their old paper-based system with new web-based technology to improve the supplier qualification and accreditation process for Procurement. "Our business had grown rapidly in the last few years," said a spokesperson for the organisation. "As such, we needed a highly efficient and scalable solution to manage the complex due diligence process of a large supplier base."
They chose PROACTIS Supplier Relationship Management (SRM) to manage the supplier recruiting, qualification, adoption, and performance appraisal process with key suppliers: "We wanted a solution to automate SRM processes for collecting and maintaining accurate, up-to-date information of suppliers. This included online questionnaire templates, workflow and automatic scoring to enrich data for mandatory fields in SAP, such as company registration number, VAT number, DUNS number, etc. In addition, services and risk management to track supplier safety information, compile supplier risk profiles, and verify insurance coverage during qualification and ongoing performance review stages."
The organisation spends £750m a year on goods and services and one-third of that spend is managed centrally by Procurement; this equates to approximately 200 strategic suppliers. "The system needed to provide automated and repeatable processes that could reduce Procurement expenses and allow us to work effectively with more suppliers than ever before. There should be no re-keying of data and it should provide suppliers with controlled access to maintain their own company information and view current account status online, via a Supplier Portal, without needing to call, thereby reduce administration time for both parties."
The SRM solution provided by PROACTIS enables the organisation to effectively communicate qualification requirements to suppliers, create baselines for evaluating supplier risk, and ensure conformance to specific supply requirements. By deploying electronic tools to manage qualification data, they have increased transparency across procurement staff and business units. This visibility increases access to qualification details and audit results and encourages communication with suppliers to resolve any identified issues. Importantly, it also provides their customers with confidence that the company is managing risk in the supply chain.
"Before PROACTIS, supplier qualification and accreditation was too subjective providing little visibility of risks. There was no consistent measurement and evaluation of suppliers. Risk was effectively 'buried' in paper and filing cabinets. With PROACTIS, we now have a fully automated, transparent and repeatable process."
The organisation has established a supplier accreditation and approval process for its suppliers using a detailed set of online questionnaires and automatic scoring of responses. These are specific to various categories of goods and services that are purchased. The prequalification questionnaire provides basic information on the supplier operations, safety information, references and approach to issues of concern. Suppliers must meet or exceed the minimum risk score set out by Procurement to conduct business with the organisation. The aim is to eliminate reputational, operational and financial risks resulting from insufficient management of supplier relationships. A major benefit has already been the ability to target non-compliant suppliers and bring that spend under central framework agreements to generate more value and savings.
"In addition to technology, the construction of the supplier questionnaires is extremely important to us. We spend time canvassing our Quality, Health & Safety, Corporate Responsibility, Operations, Fleet, and National Accounts managers to tailor the questions. Every time we meet as an internal working group we come up with new ideas and ways to improve. We are already asking suppliers, through the PROACTIS software, what they are doing to manage risk in their supply chain; as this is really important to us."
PROACTIS SRM provides access to all approved supplier information in a central supplier directory. The organisation can now calculate the total percentage of the supply base that is accredited based on factors including financial qualification, liability insurance, quality metrics, environment, health and safety standards, and reportable incidents. The directory can enable strategic sourcing to identify approved suppliers for new sourcing opportunities and reduce the need to allocate resources to qualify additional suppliers. Furthermore, the system automatically notifies category managers when supplier documentation nears expiration and asks suppliers to provide updated qualification information.
Summarising the next steps of the project: "We are looking at the tactical sourcing process and whether to allow 1,000 purchase requestors in SAP to raise a new supplier request in PROACTIS SRM that can then be routed via workflow for Procurement approval and automatically create a supplier batch for the registration process; this will make the process much more efficient."