Q&A with ASDA and GSK on their supplier collaboration programs
Our recent webinar on supplier collaboration tackled some of the big issues around collaborative supply chains including measuring value, competition amongst supplies and what happens with those cost savings.
Panelists Laura Babbs, Sustainability Manager at ASDA, and Matt Wilson, Head of Environmental Sustainability Centre of Excellence at GSK, provided candid insight into the challenges and benefits of the ASDA Sustain & Save Exchange and the GSK Supplier Exchange.
As an introduction, Laura explained that Asda's work with 2degrees began when Asda realised that over 90% of its environmental impact lay in its supply chain with its fresh, chilled and frozen business having some of the biggest impacts. The company set up a program with 2degrees to bring these suppliers together and create a knowledge sharing platform. Since launch 3 years ago, the suppliers have made over £4m worth of savings and ASDA has estimated that for every £1 invested in the Exchange, its suppliers are saving £4 - all whilst saving 14,000 tons of carbon dioxide in the process.
Matt then built on this, adding that for GSK, it realized that a third of its environmental impact is associated with the materials GSK buys from other companies.
On further investigation, it soon became clear that between its 6,000 – 20,000 Tier A suppliers each contributed only a small piece of the puzzle, so it couldn't simply go to the top ten to address the issue . GSK came to the conclusion that it had to engage its suppliers at scale. So it launched the online GSK Supplier Innovation Exchange. In the first 6 months since launch, some £10m and 70,000 tons of CO2 worth of suppler saving opportunities were disclosed; suppliers benefiting to the tune of some £200,000 directly from making improvements in their own operations.
What is your experience with suppliers who may be competitors, working together and collaborating?
GSK So far the topic of energy has been broad enough that we haven't encountered any problems in this area. We are delighted at how willing people are to share information and see the supplier base broadening on the Exchange, so we don't envisage problems arising further ahead.
ASDA It's a bit like school sports day, where everyone wants to win and be the best but doesn't want to look like the bad guy not cheering the others on! In practicality though there are certain issues, such as site visits where companies are naturally cautious - but the broad array of categories under the exchange mean that this isn't a real problem.
Also, we've found that competition can be positive for driving engagement - if your competitor is doing something you want to do it better!
Have you encountered any unexpected surprises or benefits in running the programs?
ASDA Seeing the relationships that have been built between two businesses who may never have been involved previously has been really refreshing and a lot of this happens without ASDA's direct involvement.
GSK The platform provides a powerful way to engage a large number of suppliers at one time, and we've been able create more connections because of this. One example of this is between our customers and our suppliers – for example we invited the NHS to talk to our suppliers about their challenges which has added real value and helps to motivate our suppliers,
What have been the challenges in getting the exchanges to their current stages?
GSK It was developing the business case. We also had to do a lot of work to ensure the business case demonstrated what we would gain as a business, and an acceptance that this is a long term investment.
ASDA We were lucky at the early stage as we had senior buy-in, but for us the challenge was getting to the critical mass of supplier members. We did this by demonstrating over a couple of years to suppliers that savings would be kept by them which has really helped to build trust with ASDA.
How have you been measuring value?
GSK We have used the platform as a vehicle to reduce environmental impacts, so we measure carbon reductions, plus other things such as cost. There are also more esoteric measurements, like trust. We found that 76% of suppliers thought that the exchange builds stronger links with GSK, whilst over 95% found value in the exchange.
ASDA Similar to GSK, we look at trust with suppliers, in addition to carbon and cost reductions. We also look at what types of businesses are involved in the Exchange, so, for example, our bakery team wasn't engaged, but as sustainability became more important and the exchange matured, the involvement with this team increased.
Do you use cost savings made by suppliers in cost negotiations?
ASDA Categorically 'no'. Any savings made by suppliers on the Exchange are theirs to keep, and also they do not have to disclose any savings made.
GSK Anything suppliers learn or disclose and take away is theirs to keep - we don't pursue it. We take a long term view that the more efficient the supplier the better value they offer us. We also, run targeted projects through the exchange which are aimed at 'joint savings', for example, over energy procurement, but these are purely voluntary.
Where has Fully Linked Collaboration delivered the most value?
ASDA The savings suppliers have shared with us. It's been a three year process during which we've driven investment and savings of around £15m out of the supply base which would not have happened without the Exchange.
GSK Innovation and access – being able to demonstrate that the more sustainable equals more cost effectiveness, whilst also collectively fast tracking how we learn together.
How far can you take forward the fully collaborative approach?
GSK Looking at the statistics from our initial engagement, we estimate that our suppliers spend around £400m on energy, but less than 30% have a reduction target and less than that a management program, so we estimate that there's about £120m worth of cost there that isn't being managed as well as it could be. Or to put it another way - there's potentially tonnes of carbon that we are contributing to the environment unnecessarily, so how do we start tackling those big numbers?
ASDA We're a little further ahead on our Exchange, so we're starting to consider how we can tackle other issues such as a food fraud, all whilst the energy work remains ongoing.
Read more about supplier collaboration and these programs here and download the Procurement Leaders Supplier Collaboration whitepaper.