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Deliver defined cost, service delivery, risk and relationship value

LV=

LV= is the UK's largest friendly society delivering insurance, investment and retirement products to more than five million customers and members. With 6,000 employees working in 17 offices across the UK, LV='s vision is to be the UK's best loved insurer.

State of Flux's 2013 Global SRM Research Report showcased the great work LV= were doing to develop their approach to supplier relationship management (SRM). Having already made significant progress embedding good practice and a standard methodology, Tom Lewers, Commercial Services Director, was quick to point out that – ‘realistically’ – it was the beginning of their supplier management journey and they had set a clear agenda to progress.

Hear about LV='s continued progress and positive feedback, and how the LV= approach to collaboration and partnering has developed. Learn how they put collaboration theory into practice to develop the technology that now sits at the heart of their supplier management environment.

Less than 12 months on from the publication of State of Flux's SRM report, this is the feedback the supplier management approach and framework developed by Tom Lewers and his team is getting from LV=’s senior leadership team.

"Collaboration at its best, embracing our mutual values and delivering a blueprint of partnering excellence." Mike Rogers, CEO

"It is in the area of supplier risk management that the supplier management team are making the greatest impact. The management and mitigation of supply chain risk, to include the highest levels of service delivery and availability, are critical to the general insurance business. It’s reassuring that the supplier management team understand how to drive the fullest overall value from key relationships, particularly our technology partners." John O’Roarke, MD, General Insurance

The supplier management team demonstrates the behaviours and insight required to take good practice to great. Technology is of course at the core of the digital agenda and partnering successfully is a key differentiator here. The team has as a direct result evolved into a leading edge capability, growing in size and scope along the way, and winning the hearts and minds of challenging stakeholders." Richard Warner, Chief Information Officer

"If it wasn't hard, everyone would do it. It's their ability to evolve, adapt and remain in tune with business priorities that make the LV= difference. Supplier Management support my partnership team in external market bids and through the whole relationship lifecycle. They have extended and matured their scope beyond transactional procurement into a strategic sourcing and supplier management capability." Richard Rowney, MD, Life & Pensions


So what was the context and how was this achieved?

Well, the 2011 background was £3 million in lost revenue from poor supplier performance. Critical outsourced customer data contracts were not managed and under regulatory pressure. LV= needed to radically change the way it managed its key suppliers. With approval and sponsorship from the LV= board, sourcing and supplier management was formed. Alongside the existing sourcing capability, the team’s prime objective was to become the LV= centre of supplier management excellence. Three near term deliverables for the supplier management programme were to build a talent management pipeline; embed a supplier management framework across LV=; and deliver defined cost, service delivery, risk and relationship value.
 

Supplier management programme structure 

To achieve a level of recognised excellence, a specialist partner was selected. State of Flux was identified as having the right culture, capability and tools to partner with LV=. This is where LV= put its collaboration model into practice.

LV-collaboration-model.png

'Shared mind' collaboration model

Both parties assigned a senior executive sponsor, their purpose to deliver consistently on partnering expectations and set clear direction. Workshops were held, and common goals and objectives agreed. A collaboration model was built to organise both parties around common components, congruent with the sought after outcomes. The model established one baseline upon which good conversations could take place. LV= shared its business plans and key business stakeholder challenges with State of Flux to further support openness and trust in all dialogue. It would be na├»ve to suggest the relationship ran smoothly throughout, though it was the difficult conversations that ultimately led to the greatest value. The key was agreeing the relationship rules and behavioural expectations up front.

 

Talent and capability

Supplier manager role profiles were jointly written and the wider business engaged to ensure full buy-in. The roles focused on behavioural profiling, and in particular, collaborative working, influencing capability and creative thinking. 

Within six months Keith Bray, Head of Supplier Management, was recruited, shortly followed by four experienced supplier managers. Keith’s selection focused on talent potential and behavioural skills, then technical competency. Talent management was at the heart of the agenda.

Personal development plans were designed to include measurable objectives and with a line of sight up to board level. Following a State of Flux led skills gap analysis, a personal training programme was developed for each supplier manager. The programme included ‘Managing Supplier Relationships – Inside the Account Manager’s Head’ training, focused on collaborative working styles and, in particular, how to develop joint supplier account plans. It also taught the skills required to develop sustainable business relationships and how to strategically position a customer of choice dialogue.
 

The value of partnering

LV= contract with approximately 1,200 approved suppliers across an annual spend profile of £300m. A segmentation model was designed to establish which suppliers are the most important now and moving forwards. All suppliers are now assessed annually and segmented into one of four categories: strategic, preferred, approved or legacy. LV= and State of Flux's combined experience of how to sell to challenging stakeholders the value of supplier management, alongside a joined up communication strategy, delivered significantly earlier buy-in across LV= than originally anticipated.

The Supplier Management Framework was developed to connect the dots between all relevant stakeholders across LV=, to facilitate single and cohesive management of all key suppliers. With senior executive sponsorship, the framework was embedded into LV= via targeted roadshows and implementation of a self-service intranet experience. Self-service has been rolled out to more than 400 colleagues, connected in a social collaboration environment. It delivers a sharing workspace with access to experiences, tools and techniques. Regular coaching, review and feedback sessions are led by the supplier management team to ensure a fresh approach and results are being delivered.
 

Supplier management framework

The framework was welcomed by key stakeholders and quickly delivered tangible benefit. For example, a strategic technology supplier was experiencing performance, people and financial difficulties in 2012. All risks were identified through the close management of the relationship, following the framework. Regular financial checks, open dialogue with the supplier’s staff and clients, and visits to offices to review capacity led to the supplier management team leading and implementing an insourcing project. The project transferred over 30 supplier key personnel across to LV='s CIO to protect this critical service. Just six months later the supplier entered into liquidation. Within 12 months, this project delivered over £1.2 million of sustainable budget reduction and mitigated significant operational, customer data and financial risk.

 

"The supplier management team promised they could take away my supplier frustrations. I'm now getting better performance, better quality, and better value thanks to the consistency and clarity provided by the Supplier Management Framework." Steve Martin, LV=

Technology enablement

To add an additional layer of long-term value, LV= selected State of Flux to implement a centrally managed technology-enabled solution to capture all aspects of a relationship, and deliver a secure environment for consistent and transparent supplier management throughout LV=.

The Statess supplier management platform was the chosen technology solution for LV=, particularly because of its analytical and reporting functionality, alongside the security and general integrity of the system. Branded ICO (Innovate, Collaborate and Operate), the solution was rolled out to six phase one strategic suppliers in eight weeks. Training was jointly delivered to the key supplier account managers.

In collaboration with State of Flux, an industry-leading LV= supplier management capability has emerged and in less than 24 months. Priority one service outages have reduced by 60%; cost by 9%; stakeholder satisfaction is at 98.9%; talent management is at the core of the agenda; a technology enabled environment is driving defined value and innovation from key relationships; and risk and complexity has been removed from the supply chain.

LV= and State of Flux worked together to further develop ICO. Both parties recognise the mutual benefits to be gained.


ICO Supplier Relationship Management System

ICO is a web-based and hosted platform for managing our key suppliers, ensuring we 
can quickly and easily share key relationship information. 

It ensures that both LV= and our suppliers share a common view of the relationship, and provides tools that enable us to collaborate more effectively and drive innovative thinking.

Working in collaboration, LV= and State of Flux have enhanced the system to deliver industry-leading innovation, supplier assessment and contract management technologies.

Transparency was key. Issues were tackled as they arose, and debate, challenge and idea generation led to 360 relationship survey functionality being developed. The surveys became the baseline for all key supplier relationships, assisting the development of joint action plans and other improvement activities. LV= stakeholders wholly embraced the opportunity to see their feedback translate into action plans. As one senior project manager remarked, “Great tool, great collaboration – good to see a positive outcome of proactive supplier engagement and management. Well done!” 

Not satisfied with accepting the successes already achieved, the two companies sought further ICO enhancements. These included a ‘lite-touch’ implementation for suppliers with a relatively lower risk and spend profile. An advanced survey engine was also used to build an automated Information Security Questionnaire. This new capability included skip logic and automated scoring that turned a previously manual and cumbersome process into an efficient and insightful means for assessing a supplier’s control framework to further protect LV= customer data.

Following one joint brainstorming session, the idea to create within ICO an environment for capturing supplier innovation was agreed. Supplier feedback highlighted the frustration many suppliers experience of not knowing how to present great ideas to LV=. In response, LV= designed an innovation blueprint, which State of Flux built. The end-to-end supplier facing innovation process is now facilitated using ICO and ensures transparent visibility of progress. The investment has delivered a return in less than six months. One of many submissions was an idea from a payment services supplier to create a new method of storing card data. The idea was implemented utilising a fast track process and is now delivering sustainable bottom-line benefit of £84,000 per annum. The innovation tool is recognised as a true value-add tool.
 

Partner evolution

In 2012, LV= participated in the State of Flux SRM survey and were benchmarked as improving but still ‘followers’ in a number of areas. A detailed SWOT analysis was conducted to help LV= identify improvement areas in its supplier management programme. In the 2013 report and again in 2014, LV= are recognised amongst a small group of SRM leaders.

"Collaboration with LV= has created scalable and sustainable SRM. LV= are formally recognised for their excellence in supplier management and are leading the way with their technology implementation." Alan Day, Chairman and Founder of State of Flux

Conclusion

There is a myth perpetuated that ‘collaboration doesn’t come naturally in business’. LV= and State of Flux explored the models and process of collaboration and concluded that, at its core, collaboration serves as a framework for a strategic conversation to achieve a common mission.

Working collaboratively, the companies have delivered significant and sustainable cost, service, risk and relationship value. LV= would not have matured its supplier management capability at the speed or indeed to an industry good practice standard without working well together.

Collaboration is traditionally defined as the action of working with someone to create something. LV= and State of Flux have collaborated extraordinarily and trust fundamentally underpins the successes. Collaboration and sharing are highly valued attributes in LV= and have become increasingly important to success in an interconnected world.

It is only from collaborative working that LV= has managed to achieve this level of maturity and in a relatively short amount of time. 

Now formally recognised as a customer of choice with many of the strategic and preferred suppliers, the LV= business is enjoying preferential access to scarce supplier resource and capability. The supplier management team are driving innovation and value throughout the supply chain. LV= and State of Flux have delivered a highly successful, scalable and sustainable supplier management programme , recognised across multiple industry sectors.

"LV= have successfully accelerated SRM across their business and beyond. No other customer has challenged us as LV= has to develop new capability and system functionality." Alan Day, Chairman of State of Flux


Note: This case study is based on the shortlisted LV= entry to the 2014 Procurement Leaders Awards for best external collaboration.


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