Raising the bar - Supply Chain Management in a legal business
With the traditional law firm models changing and the legal market evolving at a rapid pace, how do such businesses improve their supply chain management?
We recognise this issue all too well as in March this year, DWF became the largest listed law firm to successfully float on the main market of the London Stock Exchange. The transition from a partnership to a PLC only served to reinforce the need for a robust approach to managing supply chains with an increasing emphasis on consistency, transparency and innovation. For us, this meant greater interest from clients, investors and other stakeholders in how DWF assesses the suitability of its suppliers.
Addressing these challenges required subtle, but fundamental changes to the engagement and management supplier approach. Investment in a Procurement & Supply Chain Relationship Management function was undertaken, recognising that the focus of establishing, embedding and maintaining best practise required professional resource with a specific skill-set. This was followed by setting the vision for supply chain management within the business – "To provide a coherent and consistent approach for managing risk, driving innovation and delivering competitive advantage across the entire DWF supply chain". With the vision articulated, the procurement and SCM strategy was revised to reflect both the ambition and drive, and also the changing landscape of how supply chains need to be managed. As a result of external factors such as the introduction of Section 54 of the Modern Slavery Act 2015 requiring transparency within supply chains, and by extension an increasing interest from clients, investors and other stakeholders in how enterprises assess the suitability of their suppliers.
A potential misconception is that some aspects of due diligence - such as those required for modern slavery - prevail within industries. Legal businesses are far from immune to the potential risks associated with any such potential breach of obligations, and consequently, the revised procurement strategy included a substantive element of rigour implementing appropriate due diligence measures before any contract award – but just as importantly, on an ongoing basis. Undertaking supplier due diligence is not just a 'box-ticking' exercise. DWF is pushing forward with applying best-in-class approaches, and this includes developing a governance framework for SCM, which encompasses a dynamic approach to due diligence.
Pre-contract award, suppliers are provided with a "Supplier Code of Conduct", a document which articulates how DWF wish to engage with their supply chain. The code highlights the approach that needs to be taken concerning social, ethical and environmental challenges that organisations face today, a positive response is required from the recipient stating that they can comply. An intrinsic element of the Request for Proposal ("RFP") is an "Ethical Sourcing Questionnaire" spanning subjects such as diversity, inclusion, environmental factors and equality, which suppliers are required to complete. This allows for any unexpected responses to be challenged, permitting a risk-based assessment to be taken. Finally, a "Conflicts of interest" declaration has been developed, providing information on actual, potential or perceived conflicts of interest which may be present. Exploratory work is already in progress to develop an automated approach to managing these elements, allowing suppliers to become 'self-servers' via online documentation upload. The roll-out of this technology will reduce administrative burden, streamlining the overall process – and support a strategic objective of proactively managing due diligence on an ongoing basis by utilising time-based triggers. Any data-driven documentation (e.g. copies of required insurance certificates) are always valid, supported by structured review meetings with frequencies determined by categorisation based upon spend segmentation techniques, and overlaid with the establishment of a programme of supplier audits.
There are plenty of good reasons to adopt a comprehensive approach to supplier due diligence within the SCM framework:
- Legal, the requirement for organisations of a certain profile to produce a Modern Slavery Statement to comply with Section 54 of the Act,
- Ethical, it is unacceptable to perpetrate or condone inappropriate business practices, whether through ignorance or otherwise, and
- Commercial this aspect is twofold:
- Clients and customers, both incumbent and potential, expect to see evidence of how organisations are identifying and addressing areas of potential risk within their supply chains, and hence applying a very superficial approach could be a negative differentiator;
- In the event of any incident occurring that potentially could have been avoided by appropriate supply chain due diligence, the adverse publicity could be extremely damaging to a reputation, and a have a corresponding suppressive impact upon share price.
And all of these point towards risk mitigation – an often unseen or unconsidered benefit which professional procurement can deliver.
Internal stakeholder engagement is a key component of bringing this strategy to life – to make a difference, you have to make it breathe. The appetite for change, and the innovative culture at DWF means that pushing the boundaries and redefining supplier management has been welcomed with open arms - and establishing the tangible benefits that the application of a structured approach to SCM can and will deliver is already generating momentum and creating internal advocates for early engagement with the procurement function.
Businesses in transition can use their procurement function to really transform their enterprise in positive ways; DWF has embarked upon a procurement transformation, transitioning from tactical purchasing to delivering an agenda of collaborative, performance-driven supplier relationships, embodied through the application of the principles and techniques of strategic supply chain management – and this is absolutely in accord with one of DWF's strategic pillars of "doing things differently."
Article by Quenton Arber, Procurement & Supply Chain Relationship Manager