Utility Week

THE RESULTS AND WHY THEY MATTER Andy Clark, head of procurement and contract management, Yorkshire Water "The challenges faced by and expecta ons placed on supply chain management have never been greater. There are an increasing number of risks that challenge compli- ance and reputa on of businesses through new legisla on such as the Modern Slavery Act and GDPR. These areas alter the dynamic for procure- ment leaders away from seeking to protect the business through contract clauses and into proac ve management of risk and much greater visibility of the opera on of the supply chain. Coupled with this increased need for effec ve risk management is the ever-increasing need for efficiency seen through progressively challenging price determina ons, driven by real affordability issues for customers. Most organisa ons deliver a sig- nificant propor on of their work through third party spend and as a result this efficiency challenge falls to a great degree on supply chain managers. The levels of efficiency required mean that innova on both in terms of solu ons delivered and contract models are required. Many organisa ons are looking at tradi onal risk- alloca ng contract models and the high overhead that is typically associated and re-evalua ng whether more interdependent risk-sharing models would represent be er value. Alliances are generally considered to be some of the most mature risk- sharing models and a good fit for delivering complex and high risk infrastruc- ture. Alongside this drive for more sophis cated models is a reversion to more straigh orward contracts for simple works. This move towards a Tier 2 model has been increasingly prevalent in the electricity and gas sectors and is becoming more common in water as the need to find lower overhead delivery routes becomes more pressing. The drive for innova on also requires supply chain managers to consider whether the contract models and arrangements which are established create innova on-ogenic environments or whether they s fle innova on. To promote innova on, suppliers need early access to risk development and a more embedded working process to gain the insight, data and strategic under- standing to drive change. Clients are likely to have to take or at least share de- livery risk for suppliers to be truly freed to innovate and this challenges some of the risk-averse prac ces of u lity clients. A further area of innova on is to look at the types of coverage which contracts encompass. Innova on is less likely when suppliers are handled transac onal- ly and contracted for only a small part of an overall process. The drive for efficiency also challenges commer- cial func ons to be agile and responsive to the needs of the business. New technologies are enabling efficiency in the delivery of procurement exercises and the contract management process. A key feature of this is ac- cess to be er data, wheth- er that is consump on history to aid procurement or contract usage to aid effec ve KPI management by contract managers. Used effec vely this gives the op- portunity for me and cost savings for both the procurer and bidder." KEY FINDINGS   The majority of u lity companies see technology changing procurement and believe alliances can be effec ve.   58 per cent feel technology is changing their businesses' approach to procurement.   52 per cent feel alliances are the most effec ve and efficient approach to the delivery of major capital programmes.   46 per cent expect supply chain partners to have a much more ac ve role in infrastructure management and opera on in five years' me, while water/network operators focus on data management.   44 per cent say their businesses' supply chain arrangements allow them to be open to disrup ve innova on. P R E S E N T S 10 | 20TH - 26TH APRIL 2018 | UTILITY WEEK P R E S E N T S

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