• both sides must want a relationship

• there must be trust between the two parties

To find out if our suppliers share our belief in partnership, and whether the foundations of trust are in place, we commissioned new research in early 1998.

[ Determining suppliers priorities ]
In 1996 the Bank commissioned Moseley Consulting Ltd to conduct a focus group and interview a small number of suppliers. In the group, suppliers indicated that the following issues were of most concern. In order of decreasing priority:

In the first instance, the existence of an appropriate business opportunity was of paramount importance to our suppliers. This was followed closely by an express preference for relationships to be long-term and for all deals to be fair. The prompt settling of bills and the existence of opportunities for participation and partnership came next in order of priority. Lastly, the importance of clear communication was stressed.

[ Measuring performance ]
The Bank places great weight on the development of partnerships with suppliers, but what if this view is not shared by the supplier? In order Delivering Value to assess this, and the other areas identified as being important to suppliers, telephone interviews were conducted with a random sample of 33 of the Bank's 262 Key Suppliers (where a Key Supplier is defined as an area in which spend exceeds £50,000 per annum). Interviews took place early in 1998 and were conducted by researchers working for Nunwood Consulting Ltd.

[ Perceptions of relationship held with the Bank ]
Virtually all suppliers interviewed (94%) view the relationship that they have with the Bank as a 'partnership'.

When asked why they felt this: -

• 65% said 'each party gets the best out of the relationship',

• 10% mentioned the 'Partnership Approach',

• 10% said "they shared project costs with the Bank".

The 6% of suppliers who said they didn't feel they had a 'partnership' with the Bank expressed a wish to develop one in the future.

[ Attitudes towards the Bank's Partnership Approach ]
Of the suppliers interviewed, two thirds said that they were aware of the launch of the Bank's Partnership Approach. When asked how much they knew about the Partnership Approach there were mixed levels of knowledge, with 61% of suppliers saying that they knew a lot about it and 39% knowing little or nothing.

So it appears from this research that our belief in partnership is shared by the vast majority of our suppliers. However, it would seem that the detail of our Partnership Approach is not getting across to a significant proportion of suppliers and this is something we will pay more attention to in the future.

[ Do we engage in long-term relationships with suppliers ]
Unfortunately, we do not yet maintain centralised records of the length of relationship we have with each supplier. However, it has been possible to indirectly measure our performance in this area by looking at the number of our contracts which are not considered to be open to review.

In 1997, a Key Supplier Review Project was initiated. As part of the review, the following factors were assessed with all suppliers where aggregate spend was in excess of £50,000 per annum.

• Is a formal contract in place?

• Is the relationship such that there is scope for review?

As can be seen from the table below, in the main, the Bank's key supplier relationships are covered by contracts and are open to review. However, there is also a sizeable number of contracts that do not conform to this trend.

• The Bank is participating in relationships worth more than £20 million per annum which are not covered by a formal contract, which would indicate that a fair level of trust must exist between the Bank and its suppliers. For example, the Bank spent £650,000 in such a manner with Ritzenthaler for the construction and installation of kiosks.

• We are also participating in relationships worth more than £25 million per annum in which line management consider there is currently no scope for review of that relationship, which is indicative of the fact that the Bank is engaged in a series of relationships which are not only mutually beneficial, but also mutually dependant. For example, FI Group and UNISYS, two companies to whom the Bank outsourced its information technology development and cheque clearing activities in recent years.

1a) Trading fairly and behaving with integrity

[ Existing commitment ]
The Bank's Ethical Policy states that we will "actively seek and support the business of organisations which promote the concept of fairtrade, i.e. trade which regards the welfare and interest of local communities around the world".

[ Performance ]

i) Trading fairly
The Bank's Ethical Policy commits it to sourcing fairtrade products and services. However, there are currently only a few such products on the market, and the Bank is unlikely to ever deal directly with fairtrade producers as there are typically many levels in any supply chain.

Therefore, the Bank's approach to this area is to treat all'front-line' suppliers with integrity and to pay a fair price for goods and services. In this way, we hope to create the conditions whereby a greater number of 'fairtrade' products can gain a foothold in the supply chain in the future. As shown below, this approach is already proving a success, with the Bank about to become the largest consumer of fairtrade coffee in the country.

The Supplier Survey found that virtually all suppliers (94%) agree that the Bank is fair to them in its handling of contracts and prices. In fact, during our research, 12% of suppliers spontaneously added that the way the Bank deals with contracts and prices is "very good".

ii) Behaving with integrity
The research also found that there is very strong agreement from suppliers that the Bank behaves with integrity.

[ Comment ]
The research shows that the Bank treats 'front-line' suppliers fairly and with integrity. This is a welcome result in its own right, and bodes well for our aim to ensure that organisations further down the supply chain are treated well, particularly those based in the developing world. The case study below demonstrates that this approach is already producing results.
 

[ Future objective ]
We will strive to maintain our excellent record of integrity behaving fairly with regard to contracts and prices, and we will explore further opportunities to source products bearing the Fairtrade Mark.

JOHN SHEERIN Group Purchasing Manager 

CHRIS SMITH Group Public Affairs Manager 

1b) Settling bills promptly

[ Existing commitment ]
The Co-operative Bank is a member of the Confederation of British Industry Prompt Payment Scheme.

[ Performance & comment ]
The Supplier Survey found that there is very strong agreement from suppliers that the Bank settles its bills promptly.

• 58% of suppliers say the Bank is "very prompt" in paying invoices,

• 42% consider that the Bank is "quite prompt".

Furthermore, compared to other companies the Bank's prompt payment of invoices is favourable.

• 52% rate us as "very favourable",

• 48% say we compare "quite favourably".

The Bank's usual policy is to pay suppliers thirty days after the date of invoice and where our Financial Control department have received such paperwork promptly this policy has been adhered to throughout the year.

Management information records show that the average time for payment of invoices is 12 days.

[ Future objective ]
To ensure that the existing excellent standard of settling bills on time is maintained.

RICHARD GODDARD Group Financial Accounting Controller 

1c) Communicating effectively

[ Existing commitment ]
Last year, we stated in our Partnership Report, that we strive to establish "mutually rewarding long-term relationships". In order to do this it is essential that we communicate effectively with our Partners.

[ Performance & comment ]

i) Clear requirements
The Supplier Survey found that virtually all suppliers (97%) said that the requirements of the Bank are clear enough to enable them to be met effectively.

Only 3% felt they had not been given a clear enough explanation of what is required of them. The research also found that the Bank usually or always kept suppliers informed of relevant developments thus enabling them to make a positive contribution. However, almost a fifth of suppliers spontaneously added that they would like a more structured communication programme between the Bank and themselves.

ii) Ability to listen
All suppliers questioned agreed that the Bank listened to their suggestions and proposals.

• 67% said they agreed strongly that this was the case,

• 33% tended to agree the Bank listened to them.

[ Future objective ]
To ensure that the existing excellent standards of clear communication and listening are maintained, and to consider the development of a structured communication programme between the Bank and its suppliers.