Importance of Coordination

Until Andrew Carriline took up the post as general manager strategic sourcing, Westpac had a traditional procurement area to manage general supply contracts and two separate teams to manage suppliers - a governance team to manage major outsource suppliers and a group procurement team to manage general supply contracts.

Now both are combined under the Strategic Sourcing team, with no barriers between outsource and supply, and with a supply chain relationships team explicitly responsible for SRM. "We don't draw a distinction between procurement and sourcing - it's just all strategic sourcing," Carriline says, "and it probably goes well beyond traditional procurement."

Carriline's team is established along functional lines, and can be divided effectively into a plan/change/run arrangement, with a strategy and research team, a strategy and transactions team, supply chain relationships teams with end-to-end accountability for either commodities or functions, and some supporting technology functions, for sourcing technology, measurement and finance. He is also in the process of introducing commodity management, with a commodity owner and a commodity manager.

"We don't use an externally created decision-making process," Carriline says. "The comment that I would make is that whatever process you use, I don't believe there's a silver bullet to good decision making."

He says whatever the process, what matters is to ensure very clear accountabilities between the stakeholders in that decision-making process. While these often get blurred, Westpac spends a lot of time ensuring the accountabilities between its clients and itself and within strategic sourcing are absolutely clear.

"Then I think the second piece is that from a Westpac perspective, I believe when you make decisions you need to take account both of the immediate business need and the impact on the enterprise, if any," he says.

"Coupled with that, I think you need to have a sensible approach which is not simply price driven. A good sourcing outcome, and consistently delivering better sourcing, looks at price - so you need to maintain price competitiveness. You need to look at total cost of ownership. And that's part of the equation. You then need to look at the other side, which I don't believe traditional procurement has done very well, which is the demand side. And then you look at things like innovative ways to deliver outcomes differently.

"It's a matter of moving along the maturity curve on sourcing, I think. You and your organization know that price is but one aspect of achieving good decision making in a sourcing environment."

On the CIO's role in procurement, Carriline sees himself essentially as an adviser to the CIO, but he also expects the group CIO and his CIOs to make the decisions with his support.

Six Sigma & SRM

This tried and tested methodology can improve supplier relationship management processes, too!

Six Sigma is a proven methodology adopted by world-leading organizations to improve their business processes, manufacturing and non-manufacturing, including customer and supplier relationship management (SRM) processes.

According to Dr Hasan Akpolat, senior lecturer in Management, Policy and Practice Engineering, University of Technology, Sydney, applied to SRM, Six Sigma assists an organization in designing and improving its strategic and operational SRM processes, including decision making, internal and external communication and coordination, as well as day-to-day activities.

Using the typical Six Sigma methodologies and tools, managers are able to:

Review effectiveness and efficiency of SRM processes and identify where improvements are needed (this is the DEFINE phase of a Six Sigma project).

Measure current SRM process performance and analyze key problems causing poor performance (MEASURE and ANALYSE phases).

Improve SRM process outputs by identifying the most appropriate solutions to those problems within the SRM processes (IMPROVE phase).

Develop a monitoring and control system to sustain the improvements made (CONTROL phase).

"Six Sigma is a data-driven methodology," Akpolat says. "It uses various tools and techniques to analyze complex information and situations and provides the foundation for negotiations and dialogue between all parties involved.

"With its factual approach, Six Sigma enables managers to identify and reduce risk in any decision-making process."