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Mitigating Costs, Maximising Sales Nick Temple: Director, Business & Enterprise, SEUK Jonathan Sutherland: Head of Sourcing, Group Functions / Supply Chain Services, RBS 1 RBS Group Mitigating Costs & Maximising Sales May 2013 2 Classification: External Supplier Lifecycle – Policies and Processes In RBS Group, the Supplier lifecycle is governed by our Procurement and Contract Management Policy Standards Procurement Policy Standard • Use of approved suppliers • Risk based Service Impact Assessment • Consideration against Regulatory requirements • Approved payment channels • Requirements when entering into a contract • Engagement of Procurement Services Strategic Sourcing Approach 3 Business Purchasing Guidelines Contract Management Policy Standard • Activity driven by risk based Service Impact Assessment • Day to Day operational management • Compliance with Regulatory requirements • Management of risk and policy requirements • Continuous Improvement Contract Management Reference Handbook Not just ££ - Key Risks & Controls when dealing with suppliers Key Risks when working with suppliers FCA Financial and reputational impact from regulators Controls Risk Assessment • Service based risk assessment to ensure activity is focussed on highest spend and risk areas Policies • Procurement & Contract Management • Anti money laundering / Anti bribery and corruption • Complaints handling • IT and Business Continuity • Information Security / Data protection • Payments security / Fraud prevention • Physical Security / Safety and Health • Pre – Employment screening • Records Management Safety and Health Due Diligence • Financial Health, RFI / RFP, Supplier Capability Contracts • Robust Terms and Conditions to cover services, exit, incidents and policies People • Professional, experienced sourcing managers Business continuity Information security Customer Service Impact Commercial 4 RBS Group Standard Terms and Conditions RBS Group Standard Terms and Conditions should always be in place with Suppliers. RBS Group Purchase Orders & Contracts – Apply standard RBS Terms and Conditions – Provides protection around the risks associated with a regulated Financial Services Organisation – Regulatory & Policy requirements – Additional schedules will be required Standard Contract Clauses Pre Employment Screening Information Security The Services Warranties and Undertakings Intellectual Property Rights Confidentiality Data Protection Regulatory requirements Right of access and audit Business Continuity Liability Termination and other remedies Termination assistance TUPE 5 Developing a clear specification To avoid this 6 Get these right Quality Technical requirements Functionality Quality/reliab ility Cultural alignment Service Volumes Innovation Timings, dates & term Lead times/orderin g patterns Cost Total Cost/Budget Ancillary costs Risk Regulatory compliance Corporate Sustainabilit y Reliability & Recovery Time Requirements Selecting a Supplier Key Sourcing Activities • Negotiation strategy • Supplier / Category / Market research • Business Case • RFI / RFP / E-sourcing • Evaluation • Due diligence • Contract – appropriate clauses and negotiation Contract Award Select Supplier & Award Contract Decide Selection approach/negotiation strategy Analyse market and design RFI/RFP Short list suppliers Invite Suppliers to tender, Complete selection analysis and negotiations Evaluate and select preferred Supplier Renewal? Complete Financial Governance Complete Due Diligence Complete Financial Health Check Create Agreement/Contract & Negotiate Notify Regulator if appropriate Create implementation plan & award business/contract 7 Negotiation Hints & Tips “Why don’t you kick off” “Somewhere between …. And …..” e.g. Between £10,000 and £15,000 – the word “between” can be taken as a concession. Make your statements specific. Research has shown the result of a negotiation is often closer to what the first mover proposed than to the number the other party had in mind. “Here is my budget, can you do it for this?” “I don’t care about the cost, I just need it done now” What not to say Don’t show your hand – research the market and cost structures and make sure you negotiate for market price, not just the price you can sign off. This can automatically give the green light for the supplier to offer inflated cost. “You are the only supplier we are talking to” Whilst there are some products / services that are monopolised, try and introduce competition wherever possible. Tips to make it go your way Listen before you speak 8 3 2 1 Avoid Storytelling 5 4 Study Up Know your minimum requirem ents 7 6 Don’t let emotion take over Always have options (or you lose the ability to say “no”) When all seems lost, gain something else What impacts our negotiation position? Strengthens Weakens Sufficient time to plan & negotiate Time criticality High level of competition Minimal number of suppliers engaged Infrastructure / organisational limitations and work-arounds understood Infrastructure / organisational limitations RBS Standard Ts and Cs issued to supplier for acceptance before award Supplier terms accepted Inaccurate / ambiguous spec Clear specification, must haves and nice to haves understood No cost structure transparency Supplier cost structure understood No benchmark Industry price and service benchmarks Negotiations planned with clear objectives All information prepared and scrutinised in advance Legal / regulatory requirements clearly prepared in advance Clear audit trail with assumptions / decisions documented 9 Techniques Bargaining Emotion Logical reasoning Compromise Competition No clear goal Unprepared Key information not available Legal / regulatory requirements not known Agreements made verbally Assumptions not clarified / documented eSourcing in RBS Group “Suppliers bidding interactively on-line, in real time, for real business opportunities” Buyer Benefits • Low cost, efficient negotiations arriving at true market price • Improves competition • Level playing field • Robust, consistent, transparent and fully auditable • Reduces sourcing cycle time Supplier Benefits • Opportunity to win new business • Low cost • Evaluated on like for like • Opportunity for multiple bids • Useful feedback 10 Contract Management Ensuring we optimise commercial benefit, whilst ensuring our suppliers operate within legal and regulatory requirements, in accordance with our policies • Robust governance / roles and responsibilities • Obligations and deliverable met • Customers provided with excellent service • Best value & efficiency achieved, benefits delivered • Innovation leveraged • Performance and risk managed • Compliance to legislation, regulatory requirements and policies • Accurate and timely invoice reconciliation and payment • Changes, exits and renewals managed with minimal disruption • Good working relationships maintained 11 Pitching for Business Get the Basics Right: Process and Professionalism Separate yourself: Make your pitch stand out Hints and tips for a smooth pitch 12 Get the Basics Right – Process and Professionalism Immediately • Acknowledge receipt and intent to respond • Note dates for receipt, process and format – ask if not clear • Ask if a scoring mechanism can be shared • Read the document! More than once…. • Ask others to read it. More than once…. • Decide if attractive / suitable or not – do not waste time 13 Get the Basics Right – Process and Professionalism • Submit on time with the correct number of copies In full response • Follow the format • Answer what is asked • Short clear succinct answers, with complex supporting data in appendices • Only provide alternative views / commercial models after answering the questions – make it clear they are alternatives • Read the contractual terms and call out concerns • Follow up to confirm receipt 14 Separate Yourself – make Your pitch stand out • Understand the key drivers behind the request • Clarify what problem you are being asked to solve. Solve it, not another one. • Make it relevant to the buyers agenda / strategy / themes • Focus on the critical requirements • Have deep subject matter expertise on hand • Bring added value / innovation to the table • Be clear on your key messages and land them 15 Hints and tips for a smooth pitch Before During After • Understand where, when, whom • Arrive on time • Follow up and seek feedback • Understand if technology is provided • Dress for the part • Format – timing / questions etc • Stick to your roles • Follow up any actions during the pitch (e.g. supporting docs) • How many attendees – don’t overcrowd or be under represented • Be concise and articulate • Understand who you are presenting to – do some research • Prep, review and practice • Know your roles • Focus on specifics - avoid general sales pitches • Keep to time • Ask questions and provide constructive perspectives • Be clear on next steps • Avoid gimmicks – unnecessary free gifts 16 • Be gracious, regardless of outcome, other opportunities may follow