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The American Red Cross’s Journey to Better Practice Supply Management

Head of Procurement and Supply Management at American Red Cross

The American Red Cross is on a journey to better practice Supply Management, and it is measuring its progress by comparing itself against the top 10% of all Supply Management organizations across all industries. With this in mind, Supply Management has focused its efforts on two major objectives: minimizing risk and maximizing both commercial opportunity and financial improvement.

To achieve these objectives and deliver year-over-year (YOY) improvement, the American Red Cross has adopted a center-led Supply Management model, which is a hybrid of centralized and decentralized and matches better practice. This center is responsible for talent, strategy, benchmarking, market analysis, performance reporting and Category Management, whereas the operational elements are performed at the field level to ensure a more visible, hands-on approach that will satisfy stakeholders (e.g. folks feel more comfortable the closer it is).

The American Red Cross’s Supply Management team is a support organization. Our mission is to serve our internal stakeholders (Lines of Business and Corporate Functions, such as HR, Marketing, Finance, Facilities and IT) and external stakeholders (e.g. suppliers, including diverse suppliers and communities we operate in). By design, Supply Management connects the internal stakeholders with the external stakeholders to fulfill the Red Cross’s mission of serving those in need.

How It Gets Done

As the subject matter experts in the discipline of Supply Management, our role is to propose & facilitate. As such, our proposals are fact-based analyses, presented in a clear Business Case or Case for Action. In presenting the Case for Action, we use influence based on expertise, experience and the presentation of fact-based proposals. We do not use command and control.

Supply Management also works collaboratively with stakeholders; simply put, it is a team sport. As such, it aims to achieve a win-win scenario in every relationship, including with the supplier community. Suppliers are our colleagues and the experts in their respective fields.

As owners of the organization, the LOB/Business Unit role is to decide & own. This means they have the authority to decide what should be done to support the organization. To enable this stakeholder-centric approach, we created a Stakeholder Advisory Board. This is a governance body consisting of Senior Executives (the CEO direct report and a delegate) that meets monthly for the purposes of:

  • Assuring that the proposed Supply Management strategic initiatives align with the company’s objectives, direction and priorities
  • Assuring that the Supply Management strategic initiatives minimize risks, lowers costs and maximize operational and financial performance
  • Endorsing strategic initiatives, as proposed by Supply Management. As a matter of policy, all 3rd party spend initiatives greater than $250k annual contract value are required to come before the Board for review and endorsement

For What Result

Supply Management measures results via a Balanced Scorecard in five (5) areas:

  • ROI: Supply Management initiatives strive for 2 to 3 times or more Return on Investment (ROI).
  • Stakeholders: If the stakeholder isn’t satisfied, we can’t be successful.
  • Employees: If our team isn’t satisfied, we can’t better serve stakeholders.
  • Process/Risk: If our processes are clumsy, stakeholders will not be satisfied. Clumsy processes cause a higher risk of error and higher operating costs.
  • Financial: Cost savings to P&L are achieved and validated by Operations and Finance.

Lessons Learned

While creating a formal Stakeholder Advisory Board may not work for all organizations, it is important to note that a stakeholder-centric approach is a proven model used by the top 10% of Supply Management organizations across all industries.

Using a stakeholder-centric approach includes the following key tenets:

Inquire First, Advocate Second Diagnosing before you prescribe or, in other words, inquiring first and advocating second, is a good way to listen. Inquire about stakeholder needs, develop and present options to address those needs and then allow the stakeholders to make a choice.

Keep It Simple Stakeholders’ bandwidth is limited and they don’t live Supply Management every day. Convey thoughts and messages to them in simple and clear language — avoid jargon.

Use Examples to Help Messaging Tell the story with credible examples and benchmarks. Ask the question, “how could it be that others are doing this and we can’t?”

Quick Wins and Focus on Solving Real Business Problems It’s important to get early, quick wins that achieve meaningful business results. Bear in mind that a half a loaf is better than no loaf; you don’t get everything you want.

Achieve a Balance by Admitting Mistakes and Celebrating Successes By keeping balanced, you will build credibility and trust with internal and external stakeholders. Let others blow the horn for you as your success is achieved.

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Tom Nash is the Head of Procurement and Supply Management for the American Red Cross, a $3.5 Billion humanitarian and biomedical organization with 23,000 employees. He is accountable for ensuring a safe, responsive, cost-effective and reliable supply chain for the Red Cross.

Tom holds an Executive M.B.A. from LSU and a B.S. degree in Production Operations and Supply Chain from Arizona State University. He is certified by the Institute for Supply Management (ISM) as a Certified Purchasing Manager (C.P.M.) and by the Association for Operations Management (APICS) as Certified in Production and Inventory Management (CPIM).

Tom has led Procurement and Supply Chain transformations to better practice in 3 diverse industries (manufacturing, consumer services and health care). Prior to the Red Cross, Tom was Corporate Vice President & Chief Supply Chain Officer for Ministry Health Care and then Premier Health. He was also Corporate Vice President and Chief Procurement Officer for Cendant/Travelport and he held Global Executive roles at Royal Dutch Shell PLC, including Global Process Owner for Procurement for Shell’s Global Shared Services Company.

For a printable pdf of The American Red Cross’s Journey to Better Practice Supply Management, click here.

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