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Improve supplier innovation and your competitive advantage through SRM

Rexam

After five years spent developing a distinctive approach to supplier performance management (SPM) and engagement, global consumer packaging company Rexam dented its progress with a short term but necessary response to the 2008-09 recession.

In response it has rolled out a more ambitious and collaborative supplier relationship management (SRM) programme designed to tap supplier innovation and help give it the edge in a consolidated and competitive industry.

Next time you find yourself sipping a can of Coca-Cola, Red Bull or Heineken, take a closer look at the text on the side. Somewhere in small type among the list of ingredients, customer service details and other information, you may spot the word 'Rexam'. It may not have the brand recognition of its more famous customers, but Rexam is a drinks industry giant in its own right – a FTSE 100 company generating nearly £4 billion a year in sales and employing 8,000 people worldwide. 
 

SPM beginnings

Back in 2002, Rexam started looking at how it could apply best practices from the automotive industry to the way it managed its supply base. The result, explains Iain Percival, Group Director of Enterprise Risk and Supply Chain, was a performance measurement and management programme aimed initially at the top ten suppliers in its Beverage Can Europe & Asia (BCE&A) business. 

The programme was primarily one-directional in focus, although it did include elements such as annual executive meetings, joint six sigma projects and lean manufacturing audits (albeit without the provision of specialist engineers favoured by car makers like Toyota, where Iain worked previously). Over time, this programme was expanded to other Rexam business units and regions.

However, during the 2008-09 recession, commercial pressures led the company to change its approach. “We, like many companies up and down the supply chain, became more demanding with regard to short-term cost and cash expectations,” says Iain. The result of this “general retrenchment”, as he describes it, was that suppliers became less willing to work on innovation or continuous improvement projects.

For a company that has demanding customers constantly looking for even the tiniest competitive differentiator in their packaging, but only a relatively small internal R&D capability, this was not a situation Rexam wanted to find itself in. The supply chain leadership team therefore decided to rethink and do some “soul searching”, says Iain.
 

A more collaborative approach

As the company moved into 2010, it was decided to re-energise the original programme but this time with a more collaborative and strategic relationship focus. This was aided by the appointment of Chief Executive of Graham Chipchase, an SRM supporter who backed a change to Rexam’s balanced scorecard to include supplier relationships alongside customer relationships, as key to enhancing the company’s value.

“That’s a very powerful message to our suppliers,” says Iain. “It tells them this is part of our DNA and there will be actions behind it.”

In March 2010, BCE&A ran a pilot exercise at a supplier event attended by Graham and other Rexam senior executives. Representatives from around 50 suppliers were asked to discuss the key issues and questions they wanted to raise about the company and then feed them back directly to the leadership team.

Diane Bryden, the BCE&A Supplier Relationship Manager who facilitated the session, says one of the main frustrations expressed by suppliers was that Rexam wasn’t as open to new ideas as it had been and it was not as easy to work within this area as other customers. Similar feedback was received during events run by its South America cans business and plastic packaging division.

This dialogue has continued ever since, with voice of the supplier projects among three aluminium suppliers and one coatings supplier. Face-to-face interviews conducted with eight-ten staff at each company have sought to understand what they value about working with Rexam, the issues of most concern to them and how the relationship compares to those they have with other similar companies.

Alongside joint innovation, the main themes to come out of this listening exercise have been around improving strategy alignment, communications, decision making, consistency of approach (at plant level as well) and delivery on commitments, Diane explains.

Once the process has been completed, an action plan is written up, shared with the supplier and then reviewed at subsequent meetings. The plan makes it clear what Rexam will do and – just as importantly – can’t do differently. It’s important, notes Diane, to be honest with suppliers about the fact that decisions, for example, are likely to take longer for Rexam to make than they might wish. “How we behave is as important as what we do with these suppliers,” she says.
 

Stronger governance

During this development phase of its SRM programme, Rexam has put a lot of emphasis on establishing the right governance structure. Initially this is being applied to eight strategic suppliers in its cans business and consists of the following elements:

  • Top-to-top meetings – held once or twice a year between senior executives at Rexam and the supplier to discuss strategy, collaboration and value creation on both sides.
  • Business reviews – cross-functional meetings with agreed agendas held three times a year to review supplier performance and projects.
  • Steering committee – sitting between the top-to-top and review meetings and led by a senior executive sponsor for each supplier, its remit is to review the relationship and set joint projects for the next three years.
  • Global Innovation Council – consisting of the CEO, managing directors of its Europe and North/South America cans businesses, plus representatives from engineering, operations, supply chain and finance, it met for the first time in August to evaluate and make decisions about supplier ideas and innovations.

Iain Percival sees this latter forum as “a big step forward for us as a business... It’s going to help us align and harness the efforts and capabilities of our suppliers.” One of Rexam’s challenges is to ensure that, as a business, it gets its fair share of their R&D resources, rather than all the attention going to 'sexier' industries such as automotive and aerospace, or even to its competitors. SRM will be a key driver of this, he believes.

Innovation in beverage cans, says Iain, consists of both process improvement – faster, cheaper, safer, higher quality production – and product enhancements such as cans that change colour when they are cold enough to drink from or which incorporate special decorative finishes such as ultraviolet inks or laser engraving.
 

Value for the long term

As well as innovation, Iain argues that stronger and more collaborative relationships will help Rexam to manage supply chain risk and resilience more effectively, by understanding suppliers’ risks and discussing where mitigation efforts are best directed. He also sees opportunities to improve supply chain efficiency and sustainability, and to co-ordinate growth strategies for emerging markets – for instance, in optimising the location and construction of new production plants, of which Rexam has almost 75 globally.

While the vast majority of senior leaders at Rexam are convinced that an SRM approach is the right one, Iain admits there are pockets of scepticism still to overcome. Among suppliers, constant work is done to enhance relationships to surpass previous years.

Ultimately, only value delivered will convince some of the doubters. The test of the SRM programme’s effectiveness, he suggests, will be a cost or revenue-enhancing innovation that gives Rexam an advantage over its competitors in more than one region.

Sticking to its guns in the face of difficult economic conditions could be a stern test for Rexam’s reborn SRM programme. Iain believes the commercial and organisational foundations are stronger than they were in 2008-09.

“I am confident that, as an organisation, we realise you can’t allow short-term blips to get in the way of the long-term goal,” Iain says. “You need to have strength of character, both as an individual and an organisation, to say ‘let’s find an alternative approach’, because it will put us in a better position in two or three years’ time.”

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