For Procurement Heads‘ latest CPO Spotlight, Rachel spoke with Rupert Gaster about the role of a Chief Procurement Officer and what the current challenges are.
We spend about a billion pounds each year through our supply chain of approximately 500 suppliers.
I have a team of 30 people with end-to-end category management responsibility.
Procurement and supplier management are carried out by separate teams under my leadership. I also have accountability for the supply chain third-party management risk and environmental, social and governance (ESG) strategy.
We work closely with our sister company Allianz Commercial to leverage opportunities across our UK Holdings organisation using a buying consortium.
Increasingly I’m also working with the Allianz Global team to leverage our scale and drive consistency and simplicity in our ways of working.
LV= was acquired by Allianz a couple of years ago, how did that impact your role?
I have been heavily involved in mergers and acquisitions over the last couple of years and that has been particularly challenging against a backdrop of Brexit, a global pandemic and of course all of the macro-economic uncertainty that we have had.
During this time my role has changed significantly from being solely focused on the LV= brand to being part of a much larger global organisation.
Much of my time has been spent on executing the synergies from bringing a number of businesses together as well as working to align systems, policies and processes.
We have also welcomed the Legal & General general insurance business into the Allianz Personal family so I’ve been adapting our procurement operating model to meet the needs of the business.
My role has seen a shift as a result of all of the emerging risks we’ve encountered, many for the first time, I’ve seen much more focus from our executive team and the regulator on supply chain resilience, so I’ve been strengthening our capability in this area too.
Where do your passions lie in the day-to-day of the role?
At Allianz Personal, people and customers are at the heart of everything that we do.
This is something that I am very passionate about and central to my leadership approach.
I think it is fair to say that the primary focus of many procurement leaders is commercial delivery and that is no different at Allianz Personal; however, my number one measure of success is my employee engagement.
I truly believe that engaged and motivated people will deliver the best outcomes for business and customers. I see a direct correlation between my engagement scores and the performance delivery of the team which is why it’s so high on my agenda.
I extend that passion for people to our supply chain, as we consider our partners to be an extension of our own business, especially when you have suppliers who are dealing directly with our customers and representing our brand.
This is why supplier relationship management is a particular passion of mine. Having the right cultural fit through our supply chain is paramount, but this should not be mistaken for not driving the best commercial outcomes.
If you get it right you can deliver both.
Almost 50% of the benefits my team deliver are driven by supplier development initiatives.
What do you and LV= do differently to bring that customer-centricity to the fore?
There is no silver bullet to this, but in my experience, there are layers of multiple factors that make us unique.
Our supplier selection is really important – it goes without saying that commercial terms, delivery of business needs and risk mitigation are a given.
We have minimum standards that all of our supplier partners must meet but the culture is something that we are obsessive about, we only work with suppliers that have a similar culture to ourselves and that is easy to say but quite difficult to assess, especially when you have remote working but we immerse ourselves with the people in the supplier’s organisation.
We visit, we listen to calls, we spend time with the executive team and get a sense of whether the strategy and like-mindedness are a fit for us.
We often use outcome-based RFPs which give an opportunity to suppliers to collaborate with us upstream.
This gives us an insight into how we might work together and how innovative potential partners are.
We do a lot of training with our suppliers and for suppliers interacting with our customers we do “loved up” training. We want the experience to feel seamless with no effort for our customers.
If a policyholder was speaking to LV= and then are passed through our supply chain we need it to feel like the same organisation, so it is really important to provide that training and development.
We also spend a lot of time with our suppliers, we are quite well known in the Insurance Industry for the work that we do in the community, we do treasure hunts with suppliers and golf days for example.
As well as the social aspect we hold an annual conference where we set out our business strategy and our expectations of our partners, awards and recognition together with supplier forums where even competing suppliers come together to problem solve and generate ideas.
This was so important during the pandemic as it was such an unprecedented time.
Our forums created a sense that “we are all in it together “and there was a real sense of belonging.
We shared knowledge and resources to ensure that our customers continued to receive the very best customer service.
I remember one supplier who had a useful contact with a PPE provider when it was in short supply. He shared this resource with his competitors and that doesn’t happen very often, but I put it down to us bringing that community together and creating goodwill.
I believe that this is why our suppliers go the extra mile for us because we listen to their needs.
If we can help them to help us they will always deliver great outcomes!
You have mentioned to me something that the business was starting to adapt to help the proximity to the end customer, can you talk to me a bit about that?
As a business, we use an approach called Systems Thinking which is a way of looking at interrelated processes, systems and relationships as a whole.
So, as part of our drive to continually improve performance, this is a methodology that we use to look at our organisation through the eyes of the customer.
It starts with taking a step back and looking at what your purpose in that whole system is.
For example, when we look at the system for fulfilling an insurance claim we look at the end-to-end processes and the demand from the customer.
If customers have to come back to us for something we have failed to do then this is a poor experience and adds cost.
We know that the more effort a customer has to make the lower the Net Promoter Score will be.
We want that journey to be frictionless, but where you have a complex supply chain and multiple parties involved you are likely to encounter problems.
That is why my Supplier Management team use systems thinking to analyse the data and look at the system conditions, in other words, the things that are stopping the supplier from doing a great job. That can sometimes be processes we’ve put in place in an attempt to solve different issues which have had unintended consequences.
System thinking is not widely used in the supply chain so we’ve had to convince some of our partners to invest in this new way of working.
We’ve recently applied this methodology to our home emergency product and the initial results are quite staggering. We have seen customer satisfaction increase and will drive down cost significantly.
What is it that you have bought to your team at LV=?
As I explained earlier, people are my number one priority.
When I listened to feedback it was clear that my people wanted to have clear communication and that has been very important with remote working.
I like to think that I have brought clarity of purpose to the team. They understand the business priorities and how they directly influence this.
I’ve also raised the profile of the team with the executive team who really do understand the breadth of our expertise now.
I’ve raised the capability of my people, particularly in how they create value through collaboration and most recently I’ve been raising the bar in our agility and resilience which has meant quick a steep learning curve for me personally too.
I really enjoy spending time with the team and that is challenging given that we are working remotely so I have done a number of things which I hope make my team feel valued and motivated.
We have a whole team forum each month where we discuss burning issues and share knowledge. During Covid, I introduced virtual coffee sessions where small groups come together with me to have a cup of coffee and natter about anything and everything.
This is not about me cascading or getting progress updates, this is more about listening to individuals about how they are managing childcare, how they are feeling or if they have something at work they would like to mull over in a safe environment.
Overall, I think I’ve created an inclusive and open culture and this is evident through my high employee engagement scores and low attrition.
We frequently get applicants from other areas of the business wanting to join us.
But it’s also about being able to have fun at work, every quarter we have Fun Fridays which may consist of a quiz, art competition, scavenger hunt or even virtual horse racing!
What are the main challenges you are currently facing?
What is great is that there is a real spotlight on procurement and supplier management so this is a great opportunity for us.
Currently, the executive team is obviously interested in how we can manage rising inflation and supply chain disruption.
We have seen non-availability of materials, parts delays, labour shortages and new risks such as cyber-attacks.
We have had quite a time from a regulatory point of view as well.
We have had a Supervisory Statement from the Prudential Regulation Authority (PRA) which sets out their expectations on how firms should manage outsourcing and third-party risk management.
Strangely the pandemic had prompted us to review the way we operate for example by increasing the use of technology or giving customers alternative options to settle their claims and our assurance activities were already in good shape ahead of the new guidelines however we can always do more so we’ve set out a continuous improvement plan.
When I reflect back on the past couple of years, I’ve had the backdrop of Covid, economic turbulence and significant regulatory challenges whilst bringing three UK businesses together, it really has been quite challenging personally!
What’s next for procurement and supply chain management at LV=?
I want to ensure that we transition back to “normal office life” in a way that is right for my people. I don’t think we will go back to the way we worked before but it’s important that we strike the right balance. We are re-connecting with our suppliers again and holding a supplier conference in November which I am really looking forward to doing face to face.
My priority for the second half is the ESG agenda. We have done some great work already on that but I do want to accelerate this.
Last year we received the CIPS corporate ethics mark for the first time and we launched the Green Heart supplier promise, that was really about publicly setting our expectations for our supply chain. Allianz has a global commitment to be net zero for material and global suppliers by 2025, so we need to make sure we deliver on that commitment and set some science-based targets.
We’ll continue the work we do jointly for our communities and ensure our suppliers are inclusive places to work.
All of this great work will be included in my ESG roadmap.
