Utility Week - authoritative, impartial and essential reading for senior people within utilities, regulators and government
Issue link: https://fhpublishing.uberflip.com/i/308088
UTILITY WEEK | 9Th - 15Th MaY 2014 | 23 Operations & Assets Market view A er months, if not years, of pressure, utilities will now have to prove they have tried to help small and medium- sized enterprises (SMEs) win an increased share of work, following a ra of new pro- curement directives just agreed by the Euro- pean Union. SMEs want it, public opinion wants it, even utilities are keen as they look to increase design, construction, operational and maintenance efficiency by working directly with innovative smaller companies. Traditional procurement, whereby the big players award to tier one suppliers, means innovation is oen lost or not even offered. There is also a view that overall costs will be cut if traditional, multiple layers of transac- tions are reduced. But despite the obvious PR gain, with £400 billion-worth of safety-critical work on the table in water alone, no work should be awarded to any SME unless they show the same commitment to health and safety, envi- ronment and quality as the larger companies. To outsource any work, buyers must understand which providers are in their sup- ply chain and which have the correct creden- tials to deliver it. Only with accurate data can the utilities sector be refreshed and enlivened with new entrants, new ideas and new stand- ards of efficiency – while maintaining the industry's robust health and safety record. Global supplier information firm Achilles runs the Utilities Vendor Database (UVDB), working with 53 of the top buying organisa- tions in the utilities sector and more than 6,000 suppliers to independently scrutinise their supply chains and identify and address risks by identifying, qualifying, evaluating and monitoring suppliers. Achilles commissioned independent con- sultancy IFF to carry out research into how businesses manage information about their suppliers. Results showed that large UK busi- nesses, many of which serve the utility sec- tor, still do not even know who is in their supply chain. Further, buyers lose confidence in suppli- ers at every tier. For example, while almost two-thirds (62 per cent) of buyers were very confident their tier one suppliers would adhere to health and safety responsibilities, only 33 per cent said they were very confident their tier two suppliers would do likewise. The horsemeat scandal might still be fresh in the minds of the food manufactur- ing industry, but in other sectors the repu- tational risks of not having full knowledge of the supply chain are not properly under- stood or appreciated. Utilities face a big challenge in meeting the requirements to provide more work to SMEs. Achilles has seen several examples where main contractors have wanted to use SMEs, but the smaller firms have been reluc- tant or have struggled to complete the com- pliance checks. Likewise, many SMEs find it difficult to demonstrate understanding of their own supply chains. This means cli- ents feel more secure working through main contractors. While it is time-consuming for SMEs to perform these checks initially, with multimil- lion pound contracts at stake, they cannot afford to miss out. Achilles can support buyers so they can help suppliers to meet the compliance checks. UVDB creates an overview of requirements from all buyers in the utilities sector; about 85 per cent of their demands are the same. When SMEs understand the opportunity that could be created by making one big effort at the start, we think the initial challenge for buyers of meeting the new EU procurement require- ments will quickly be overcome. Fareita Udoh, account manager, Achilles UVDB Know your supply chain New EU procurement directives should give SMEs the chance to win a greater share of contracts, but only if they can prove their supply chain meets the necessary standards, says Fareita Udoh. Tips for SME/utility success Buyers Map your supply chains Just over half (52 per cent) of the large companies surveyed have less information about their tier two suppliers than for their tier one, while 52 per cent have never mapped out their entire supply chain. Update your information on overseas suppliers In emerging markets, only 23 per cent were very confident that suppliers would adhere to health and safety responsibilities and 20 per cent were very confident they would con- tinue to deliver the required quality. Perform a complacency check Less than half (45 per cent) of companies said they were very confident that the way they managed their supply chains allowed them to manage risk effectively. Increase audit levels Buyers will need the same robust information about suppliers in lower tiers that they cur- rently have on top level suppliers. Suppliers Demonstrate you can deliver the required health and safety standards Only 33 per cent of buyers were very confident their tier two suppliers would continue to adhere to health and safety responsibilities (62 per cent for tier one). In emerging mar- kets, that figure was only 23 per cent. Demonstrate you can deliver on time Only 18 per cent of buyers were very confident their tier two suppliers would continue to deliver the required service on time, compared with 56 per cent for tier one and 13 per cent for suppliers in emerging markets. Demonstrate quality and reliability Only 29 per cent of buyers were very confident that tier two suppliers would continue to deliver required quality; this figure was 20 per cent for emerging markets. For tier one, the score was 56 per cent.