Building long lasting relationships with suppliers is an important step in your supply chain strategy. Flexibility goes a long way, and it helps to ensure the relationship is mutually beneficial.
Quartz Network Executive Correspondent Britt Erler sat down with Neil Aronson, Global Head of Strategic Sourcing Staff Augmentation and Logistics at Uber to discuss the framework for interacting with your suppliers and building long lasting relationships that deliver value.
Neil shares his expertise on:
- Supplier Relationship Management
- The importance and necessity of SRM
- How to segment suppliers
Quartz Network: Can you share a quick introduction about yourself and your current role?
Neil Aronson: I’ve been with Uber for about four and a half years now. Prior to Uber, I spent a lot of time in consulting and other industry type positions where I worked in manufacturing financial service. Then, that led me to technology companies in the Bay Area back in 2013. Uber, specifically. I manage a team of roughly 50 globally, responsible for five key categories of spend, technology, marketing, workplace service, construction, real estate, logistics, and the marketing category.
Quartz Network: Why is supplier relationship management so important?
Neil Aronson: When we think SRM, it’s more around the process as to how you interact with suppliers. For us, SRM means providing visibility across our entire supply base to help us increase the value of our business relationships. At the end of the day, buying patterns can be analyzed, anticipated, sourcing cycles can be compressed, and collaboration can take place in real time. Although sourcing is measured heavily on savings, as an organization, that’s what I report out on a key metric.
When we think about value from an SRM standpoint, it’s really in the context of a combination of things: savings, risk mitigation, or even new technologies or products that can support our business. At the end of the day, sourcing managers and stakeholders need to bear joint responsibility. It’s limited value if it’s just one sided in sourcing striving it. We need to have our stakeholders aligned and bought in if we really want to make SRM a success.
Quartz Network: What type of framework does Uber have in place?
Neil Aronson: We’ve had the strategy in place since 2000, late 2017, we put the framework in place. Then, we have a technology that we use, Scout RFP, now that it’s a Workday company. We use that to facilitate the SRM process. But yes, we do have a whole segmentation exercise that we went through to break them into four different tiers, kind of how we view the world and how we think about our supply base. What’s strategic versus bottleneck, leverage versus routine. We did a whole exercise back in late 2018 or 19, and we’ve been doing that since.
Quartz Network: How do you segment suppliers?
Neil Aronson: There are four key tiers that we look at. If we think about strategic, there’s very few limited suppliers, but it’s critical from a competitive advantage standpoint. Those are the ones where we’re focusing on around SRM because the volume of suppliers of Uber is vast. We want to focus on that tier one strategic.
If we think about tier two, leverage suppliers, there’s many suppliers. The value there is they can respond to price movements, differentiation, and specifications but it’s a mid to high potential to add value.
Tier three and four is tactical and bottleneck, respectively. Although we have them outlined as part of our supply base, we really don’t actively do SRM. Our team is relatively small, given the size and footprint of landscape. So we’re really focusing on tier one strategic and a few tier two.
Quartz Network: For companies that are looking to implement a framework like this, what are some of the most important things that they should focus on?
Neil Aronson: The first step is defining what SRM means to you and your company. It may mean different things depending on the nature of the company and what you’re trying to accomplish. At Uber, specifically, we thought about it. At the end of the day, we want to make a long lasting relationship with our suppliers that have proven their ability to deliver value to us. It just increases collaboration with suppliers both ways. If it’s one sided, it’s not going to work. It’s almost in supportive a strategic supplier relationship, but also strategic alignment.
What is your company trying to accomplish? What are your main strategies and goals? That’s a way for you to funnel that back to your top supply base so they can come up with new innovative process technology, not just savings but more value. It gives more visibility to our stakeholders.
Quartz Network: Do you measure your supplier feedback? If so, how do you go about doing that?
Neil Aronson: We do. Again, it’s all part of the framework when we use Scout RFPs technology to facilitate the process. But within that, we have different carrier categories, areas that we look at and score appropriately. We give different weight to different thing so quality, service, cost, on time delivery. Our SLAs are different by category, and sometimes by supplier. But we do have a framework where it’s, I’d say, 80% the same across all categories, all suppliers. Then, that 20% really focuses on the nuts and bolts of that specific supplier, and what it is they’re trying to provide, whether it’s a service or goods to Uber.
Quartz Network: What are some challenges you’ve seen that other companies may also experience?
Neil Aronson: One of the biggest challenges we find, not just at Uber but in my past life as well, it’s bandwidth. SRM is very important, it’s critical. But it’s also time consuming to send out scorecards, review responses, facilitate discussions, have meetings, and go through the whole process. It’s incremental to our day jobs. Some companies have sourcing and category management delineated. But generally, these days, it’s all embedded in one type of role responsibility.
I think balance becomes a constraint, not just for us, not just on the sourcing side, but also on the business side, to spend the time and really go through this in the right way. And that’s why I said up front where it’s important to make sure this is two sided. You have your stakeholders engaged and bought into the process, because if you don’t, then it’s not going to be successful. The biggest challenge is really just finding the time and bandwidth and getting buy in from your stakeholders to actually run and facilitate this type of process.
Quartz Network: What benefit can this strategy bring to a company?
Neil Aronson: At the end of the day, you are as successful as the supply base who supports your company. So the more you can engage, the more you can provide insight into your strategies and goals, the more you can understand where they’re meeting expectations, exceeding, or falling below to course correct. Make sure it’s an ongoing dialogue. SRM is an ongoing dialogue. Maybe we’ll have quarterly meetings, but we’re always in contact with our top supply base, both tier one and tier two. Every discussion is important. Every discussion helps drive the strategy and making sure that they’re meeting our needs and expectations.
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