SRM – Why Do We Need It and What Are the Benefits?

Britt Erler

Hello, everyone. Welcome to the SCOPE Supply Chain Virtual Summit hosted on Quartz Network. My name is Britt Erler, QN Executive Correspondent. Thank you so much for joining us. I would like to welcome our guest speaker here with us today, Neil Aronson, Global Head of Strategic Sourcing Staff Augmentation and Logistics at Uber. Welcome, Neil.

Neil Aronson

Hi. Thank you.

Britt Erler

Of course. We’re so happy to have you here. I’m really excited to dive into this conversation to discuss Uber’s framework for not only interacting with your suppliers, but also building those long term relationships that ultimately deliver value. Before we do that, I would love if you could give the audience just a quick introduction and background about yourself and your current role.

Neil Aronson

Sure, thanks for the intro, Britt. So 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 also 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.

Britt Erler

Full circle. Incredible. In terms of supplier relationship management, let’s dive right in. Let’s talk about it. How do you view this? And why is it so important?

Neil Aronson

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 us around here a success.

Britt Erler

[Inaudible]. What type of framework does Uber have in place? Is this something that’s been developed over time? Or is this a strategy that’s pretty recent due to everything going on with COVID?

Neil Aronson

We’ve had the strategy in place since 2000, late 70, 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, kind of how we think about our supply base. What’s strategic versus bottleneck, leverage versus routine. We did a whole exercise back in late 18 or 19, and we’ve been doing that since.

Britt Erler

Fantastic. Let’s talk about that a little bit more. How do you segment suppliers?

Neil Aronson

As I mentioned, there are four key tiers that we look at. If we think about strategic, so 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.

Britt Erler

Great. As far as companies that are looking to implement a framework like this, what are some of the most important things that they should focus on? What are the first steps?

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, it’s really 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 what is your company trying to accomplish? What are your main 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.

Britt Erler

Of course. 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 ways 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 what it is they’re trying to provide, whether it’s a service or goods to Uber.

Britt Erler

Absolutely. As far as any key challenges that you may experience, whether it’s in your framework, specifically, or just maintaining that relationship, what are some challenges you’ve seen that other companies may experience in the same situation?

Neil Aronson

One of the biggest challenges we find, not just to do but in my past life as well, it’s bandwidth. SRM, I think it’s 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. But it’s important to, 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, I think, is really just finding the time and bandwidth and getting buy in from your stakeholders to actually run and facilitate this type of process.

Britt Erler

Right. As far as these challenges that you’ve experienced, not only in past roles, but your current one as well, have you noticed them increasing due to COVID and all the ships we’re seeing in the industry this year? Or is it something that’s kind of stayed pretty consistent, you haven’t seen any any major changes?

Neil Aronson

It’s dependent on the category. For the most part, I’d say it’s consistent. Although in some categories, where there may have been supply chain disruption, supplier destruction given COVID, and what it’s done to the economy, and just kind of logistics and distribution in general, it’s actually been more important for us to make sure that we understand where those challenges, where there’s issues, and is our supply base on track to fix said correction. It’s a good time to use SRM to uncover some issues from a supply base standpoint and kind of correct. So no, I think it’s actually becoming more critical given COVID.

Britt Erler

That’s fantastic. As far as additional benefits, let’s dive into that a little bit more. What can this really bring to a company?

Neil Aronson

I think it goes back to my previous comment as relates to increasing collaboration with suppliers. I think, 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 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.

Britt Erler

Absolutely. As far as the future of Supply Chain management, do you have a strategy in place for a year from now, five years from now? Or is it something more you see where the marketplace is, you revisit it every month?

Neil Aronson

Oh, man. I could never imagine. I could never have imagined what happened in March from a Supply Chain disruption standpoint. I don’t think anyone was prepared for it. Although we have strategies in place and dual sourcing strategies to mitigate this type of risk, but a global shutdown and disruption like we had is just unforeseen. However, because of that, we are reevaluating our processes, our supply base, dual sourcing strategies. It is making us look at the longer term strategy. I mean, every year we do an annual category strategy that aligns with the business needs. We’re looking sometimes 18 to 24 to 36 months out, but 5 years from now, I don’t know. I assume there’ll be other technologies that we can leverage to help automate processes, better control of our supply base, better visibility into spin in analytics. I think in 5 years, it’ll be a whole different view as to how sourcing operates.

Britt Erler

Absolutely. Obviously, you’re Global Head. You’re managing a lot of different teams. How do you keep them aligned with the strategies, and make sure that the framework that’s in place really makes sense for all your teams across the board?

Neil Aronson

I have three main verticals, I have [inaudible] sourcing, global logistics, and our staff augmentation program. Every single team has many goals underneath. I managed to three top level goals that I report out on a monthly basis that I think are important. That’s kind of my North Star for the broader organization. Those three goals are one is savings, obviously, both hard savings, P&L impact, cost avoidance, and then actually revenue generating. Sometimes, we engage in projects, we’re actually helping to drive revenue. So we’ll capture those as in regard to our savings number. Then, I measure the team on spend under management. So of all the addressable spend at Uber, what percentage of the spend is sourcing actually influencing? I use that as a metric. Then, I look at volume of projects, whether it’s a sourcing event, on audit, a special project, income negotiation, I use that as a risk mitigation factor. Anything we do, we’re driving risk mitigation as we work with our suppliers and our stakeholders to make sure that we’re getting the best value. Contractually, we have protection in place for Uber. I look at those three main goals, and that kind of aligns the team, kind of our North Star.

Britt Erler

Of course. Now, I know this is difficult, especially in large companies like yours for different departments to really stay in communication with each other, from supply chain, finance, HR. How do you manage those relationships, especially when you want the success of the company to all be aligned in the same? When you’re talking about risk management and dealing with your suppliers and your stakeholders, are you dealing really closely with your finance team at the same time?

Neil Aronson

We do. We have a Strategic Finance partner, and each one of our key categories that we align closely with. At the beginning of the year, well, I guess at the end of the year, we think about budgets for the next year, and we align closely with what that budget is. Along the way we do work with strat finance on some of the larger projects where there’s big spends, want to make sure that not only sourcing has approved the deal and the negotiation, but we want to make sure that finances engaged and they understand the spend and are okay with it as well. Yeah, we have a very close alignment across all of our key categories and strat finance. I think it’s critical.

Britt Erler

It is critical. A lot of companies haven’t found that synergy, especially with everything going on. Now they’re scrambling just to survive. So having that communication and that relationship is so important. Any final pieces of advice that you have for Supply Chain leaders in the industry right now? Obviously, you’ve seen a lot of changes upfront in your role. So anything you could give them just to help them get through this time?

Neil Aronson

As I think about my time at Uber, I think that simplicity is sometimes better than long, arduous processes. I think we need to be flexible. I think flexibility is an important point. Yes, we have a seven step sourcing engagement model with our stakeholders. I mean, it was developed by Agent Kearney back in the 80s. I think most companies still adopt some of that. We need to be smart about how we go after certain commodities and how we source certain things. We move so fast, companies these days are moving so quick that we have to adjust. Again, flexibility. Don’t always have time to do all seven steps in the sourcing process, but we need to be smart about which ones we’re doing, and making sure that we’re grabbing the right value for our stakeholders and our companies.

Britt Erler

Of course. Being strategic and being flexible is key. I mean, we’re obviously an events company, and had to make everything virtual this year in probably into 2021. Thankfully, we were quick and able to adapt on our feet, but many companies aren’t able to do that. As far as flexibility, you obviously have this framework in place. How do you instill that in your team?

Neil Aronson

It’s a good question. I think at Uber, specifically, I’m pretty fortunate, I’m a very senior team. The average leader on my team has 10 to 20 years experience and most have worked in the Bay Area for other technology companies. I think that’s consistent across a lot of companies in the Bay Area as it relates to speed, moving quick, flexibility, adapting to the different culture of a company, and so it’s kind of ingrained already. I’ve been very fortunate. I have a great leadership team. We have like minded personalities in the way we engage with our stakeholders, and it hasn’t really been a problem.

Britt Erler

Fantastic. That’s excellent. Hopefully, people in other companies that are watching this are able to adapt some of those strategies that you have in place. Any final comments for anyone within the Supply Chain industry before I let you go?

Neil Aronson

No, I don’t think so. If you want to reach out independently, I think my contact information will be included in this presentation. I’d be more than happy to drive a conversation, kind of walk through some of the other strategies and methodologies, and just network with anyone who’s interested.

Britt Erler

Of course. Fantastic. Thank you so much, Neil, for joining us today. It’s been an absolute pleasure. You’ve provided some incredible strategies and advice for other Supply Chain leaders. Everyone that’s watching, thank you so much for joining us. If you have any additional questions for Neil, please do not forget to comment or ask in the discussion forum below. Thank you again for joining us. Please stay safe, be healthy, and enjoy the rest of the summit.

Neil Aronson

Thanks, Britt.