PANEL SESSION: Innovative sourcing and reducing cost for better outcomes

John Wallace, Head of Procurement & Purchasing at Anchor Trust Leisa Hewitt, Procurement Director at PfHMike Doyle, Assistant Director at NHS North West Procurement DevelopmentJohn Durrell, Director for Private Sector at Inprova Group

Value Adding Procurement at Anchor

John WallaceHead of Procurement

Anchor Business Plan – 2015 to 2020

Business Objectives

• Best Customer Service• Best Place to Work• Best Run Company• Offer Anchor Services to More Older People

“Improve customer satisfaction across all services…….”“Ensuring value for money in all procurement decisions” “A culture of continuous improvement and innovation”

Anchor Business Plan – 2015 to 2020

Financials

• Growth Plans• Acquisitions• Increasing EBITDA• Cost Management

• Operating costs as proportion of t/o reducing (5%)• Support costs as proportion of t/o reducing (24%)

Procurement supporting cost management deliveryProcurement supporting M&A activity

Annual Expenditure

Category Sub Cat I&E Capital SC Total

Property 37 £32m £36m £4m £72.0m

Corporate Services 37 £19m £20.7m £0.3m £40.0m

IT / Telecoms 4 £14.5m £0m £2.5m £17.0m

Facilities Management 35 £9.3m £1.1m £3.9m £14.3m

Catering and Cleaning 29 £4.3m £0m £5.9m £10.2m

Utilities 6 £8m £1m £12.5 £21.5m

Total £87.1m £58.8m £29.1m £175m

The Challenges Were Clear

Tender not Procurement

Expertise

Business and Customer Alignment

Limited

Demonstration of Value for Money

Required

In isolation of the Organisational

Challenges

Access to required Goods and Services

Difficult

Blocking not Enabling

The Procurement Cornerstones

Resource Management

Leadership, Strategy and Policy

PerformanceMeasurement

& Management

OrganisationSpecific

Procurement Processes

Stakeholder Engagement

Organisation Specific

OrganisationSpecific

Charitable Organisation

Public Sector

Competitive Market

Customer Led

Property Asset BaseProcurement will respond

to the organisation’s specific requirements

Enabling our Customers

StakeholderEngagement

Business Partnering

Aligned Objectives

Category Groups

Easier Buying

Procurement will meet the needs of our customers

Communication

A Tangible Improvement in Service

Performance Measurement

& Management

Signed Off Cost Savings

Supplier Performance

Benchmarking

Customer Satisfaction

Operational StandardsProcurement will deliver

measurable improvements in cost and quality

Supporting Delivery of Business Priorities

Leadership, Strategy and Policy

Across all of Anchor

Vision, Culture, Values

National, Regional, Local

Legal, Risk, Continuity

Innovation, Environment,Diversity

Procurement will provide commercial leadership

Consistent and Focused on Delivery

ProcurementProcesses

Category Management

Purchase to Pay

Information Sources

Simple Procedures

ConsistencyProcurement will be

efficient and consistent

The Right People…………

Resource Management

Culture and Values

Technical Development

Business Competencies

Coaching, Mentoring

Succession PlanningProcurement will have the

right people on the bus

Organisation Specific

Category Management in Brief (1)

Mobilisation SourcingBaselining

• Stakeholder Identification & Analysis

• Stakeholder Mapping• Communications and

Engagement Plan • Initial Risk Assessment

Undertaken• Stage Gate Approval

• Spend & Historical Analysis

• Current Procurement Practices

• Category Segmentation• Supplier Preferencing• Existing Contracts• Baseline Calculation,

Prices and Volume• Stage Gate Approval

• Competitor Analysis• Best Practice Analysis• Whole Life Costing (TCO)• Business Needs Analysis • Cost Benefit Analysis• Specification Challenge

and Confirmation• Stage Gate Approval

Category Management in Brief (2)

Supplier Selection ContinuousImprovement

Implementation

• Supply Market Analysis and Definition

• Market Conditioning• Value and Type of

Contract• Negotiation Plan, • Actual Savings Calculation• Supplier Management• Stage Gate Approval

• Supplier Relationship Management Approach

• Performance Monitoring and Reporting

• Supplier performance Reviews

• Cost Improvement/• Benchmarking • Learning’s & Feedback

• Implementation Team• Risk Assessment &

Contingency Plan• Core Implementation

Accountabilities with KPI’s

• Implementation Plan / Targets

• Stage Gate Approval

E Procurement – Purchase to Pay

Ordering

Catalogue

PO Flipping

Invoice Scanning

Amazon experienceSingle ordering processReduced support costs

Maverick expenditure reducedImproved data qualityImproved control (PO)

Electronic invoicing and PO matchingReduced manual input / errors

Electronic invoicing and order matchingReduced support costs

Improving financial accruals

Procurement Value 2014/15

Procurement Target - £3m

• In Year Delivery £4.04m• I&E £1.65m• Service Charge £1.64m• Capital £0.75m

Customer Satisfaction

Rented Performance

Leasehold Performance

Procurement Value 2015 onwards

2015/16 2016/17 2017/18

I&E £4m £3m £1.5m

Service Charge £1m £1m £0.5m

Capital £6m £5m £3m

Total £11m £9m £5m

Cumulative £11m £20m £25m

In Summary

Recruit ProcurementLeaders withRight Values

Get Influence at Board Level

Create MeaningfulRelationships with

Suppliers

OrganisationSpecific

Embrace Procurement

Technology

Go Beyond a “Policing” Role

Concerns for delivering Strategic goals of Purchasing

Leisa HewittProcurement Director – Procurement for Housing.

Introduction

Over 18 years Procurement Experience• Housebuilding• Shop fitting• Public Sector – NHS, BTP and Railway Infrastructure

MCIPS Qualified

Determined and delivered stringent cost reduction, and savings initiatives to meet NHS austerity measures

Delivered varied contracts and frameworks over procurement career thus far

My drive is to make procurement easier for others.

Public Sector –Where are the challenges?

Strategic Goals

• Non delivery due to many differing components

• Departments inability to focus in one area

• Savings and Cost reduction are the driving factors

Value for Money

Lack of benchmarking / market testing

Poor spend visibility

Maverick spend and disaggregation

Compliance

Non-compliance with EU directives

Outdated Procurement policies and procedures

No contract register

None or unduly burdened procurement plan

Resource & Capabilities

Limited resources

Skills Gap within teams

Training limitations from lack of funding

Mike DoyleAssistant DirectorNHS North West Procurement Development

Procurement in the NHSFrom ‘back room’ to Boardroom

Areas covered

Who we areChallenges in NHS procurementThe approaches we use

NWPD Team

• Established in Spring 2013

• Small team of 4.5 WTE

• 2 ex Heads of Procurement

• 0.75 Director role - ex DoF of Central Manchester FT

• 0.75 Project Support Role

• 1 Finance Date Analyst

NHS Procurement Agenda

Link to Procurement Development Programme documents: www.gov.uk/government/collections/nhs-procurement

High Profile

2nd June 2015 – Letter to NHS Chief Execs“It is important that the NHS acts together to ensure we

achieve the most from our collective bargaining power and work together to reduce these pressures where we can”.

David Williams Director General, Finance, Commercial and NHS

Dept. of Health

4th June 2015 – BBC NewsIn a speech at the NHS Confederation conference, Jeremy

Hunt said the Carter review’s findings would shortly be announced and they are “absolutely staggering”. The review by Lord Carter has investigated procurement practices across

trusts.In September Lord Carter will set out the amount of money trusts could save by adopting “best practice” procurement

processes.Jeremy Hunt said “the hard bit starts from January, when

trusts will be expected to make specific savings”

Financial Context

*Source: The King’s Fund, Quarterly Monitoring Report of DoFs – March 2015

Latest survey: 40 per cent of NHS trusts forecasting a deficit for the end of year (2014/15)

Results of an online survey of NHS trust finance directors carried out in March 2015. 257 NHS trust finance directors to take part and 93 responded (36 per cent response rate).

In addition 187 clinical commissioning group (CCG) finance leads were contacted and 40 responded (21 per cent response rate).

Financial Context

Source: The King’s Fund, Quarterly Monitoring Report of DoFs – March 2015

Organisation 2014/15 CIP Target as Percentage of Turnover

Trusts have been buying ‘together’ for years...

..but the results are not always great…why?

Silo working still prevailsThere are too many routes to market

Trust autonomy

Procurement Challenges

No mandating of contracts or centralised control

Procurement Challenges

Competition between hospitalsLack of willingness to share informationTrust allegiance to different procurement providers/partnersPoor data qualityMultiple P2P systems deployed of varying standardsLack of appropriate skill sets and capacity

• Creating a community & culture of collective working

• Raising the profile of procurement and building the case for investment

• Improving transparency & co-ordination

• Providing robust professional and organisational development

• Developing supplier relationship management

• Supporting Trusts to deal with the increased pressure for savings

NWPDs Role

Collective Procurement

Data & Knowledge

Learning & Development

Our 3 Workstreams

Achievements So Far

Established a coaching and mentoring network + robust

and nationally recognised peer review/accreditation process

39 out of 39 Trust signed up and committed to sharing

information

Circa £3 million savings identified by NWPD and

delivered by Trusts so far 10:1 ROI on funding

Governance CEO NWC AHSN and 6 DoFs - 2 from each of C&M, GM and

L&C

Procurement partners

NHS Supply Chain delivering strong returns through joint working MOU

Strong relationships with other procurement partner organisations across UK

‘Fit for Purpose’ strategy

Lancs Acutes first to develop potential cluster approachNW Excellence in Supply Awards 2015

Our unique approach to supplier engagement and recognition

Benchmarking

Co-ordinating price benchmarking activity and departmental structure benchmarking for NW trusts

Future Leaders Programme

Other Highlights

– £2.4bn of non-pay spend

– £1.1bn of influencable non-pay spend

– £319m NW CIP target for 2014/15

– 4.74% average CIP as percentage of Trust turnover (consistent with Kings Fund Survey)

– 0.40% average savings achieved by procurement in 2013/14 as a percentage of turnover

– 2.6% average savings achieved by procurement in 2013/14 as a percentage of influenceable non pay spend

– £29m savings achieved by procurement in 2013/14

– £39m savings targeted by procurement for 2014/15

2014 NWPD Survey Results*

Spend & Savings

*Based on 75% response rate

412 total staff in post (equal to approx 500 in total)Average of 16 per department

For Trusts that submitted data in both years there is an increase from 361 WTE in 2013 to 391 WTE 2014

An increase of 8.3% 250 staff in front line procurement roles 162 staff in stores, materials management, AP and secretarialThe largest team consists of 55 and smallest team of 5Total departmental budgets range from £172k to £1,489k33% MCIPS qualified in procurement roles

6 trusts have > 20 staff and 1 trust actively manages/influences a non pay spend > £100m (see Fit for

Purpose)

2014 NWPD Survey Results*

Staffing

*Based on 75% response rate

Pressure for savings…alternative approaches needed!

• Understanding price variation

• SRM

• Maximising use of resources – joint workplanning and ‘fit for purpose’ departments

• ‘Value based procurement’ project

Pricing Transparency

EIS logo 2015?

NWPD have conceived the idea of

£1billion turnover CLUSTER as being the optimum level where collaboration can work. This is supported by evidence collated by NWPD from across the region on performance against the NHS Standards of Procurement and annual savings and procurement efficiencies achieved.

Lancashire Acute Trusts represent an approximate £1.3 billion turnover.

0.2%

0.3%0.6%

0.8%

Trust

Regional

National

Complexityof implementation

High

Low

£10bn

£90bn

£1bn

£250m

Approx Turnover

Cluster

Fit For Purpose Strategy

Lancashire Procurement

ClusterJoint Working

Shared Contracting Teams

Single Department

Phase 1 Phase 2 Phase 3

This is big – but not too big

Optimal span of control

Retained ownership by the NHS

Engaged stakeholders

Fit For Purpose Strategy

Phase 1 underway - £7.1m additional savings identified across the 4 organisations for 15/16

Value Based Procurement

Focus on pathway costs and innovation and how this can be reflected in a robust and non challengeable way in procurement exercises E.g.

how supplier claims for reduced length of stay are factored in.

Sense of communityCollective workingSharing data & knowledgeDeveloping people & organisationsNew ideas==============================Savings & efficiencies==============================

+

Supplier Relationship Management

(SRM) Process and Scoring

Supplier Performance

John DurrellDirector, Director - Private Sector

June 2015

• Setting the scene; Overview of objectives and deliverables

• Why Supplier Relationship Management (SRM)? What are the benefits?

• What’s in it for me?

• What is Supplier Segmentation?

• Buyer & sellers behaviours

• Supplier Relationship Management Policy, Supplier Scoring, Continuous Improvement Initiatives and Reporting

• AOB

Agenda

52

Strategy & Process• Business, category and supplier strategies

• Policy / Process• Controls & Approvals

Sourcing & Category Mgmt• Contract Negotiation• Preferred Supplier Lists• Market Intelligence

Supplier Relationship Mgmt

• Manage Suppliers• Supplier Service Delivery/ VIP

P2P

• Purchase Orders• Contract Renewals• Invoice Queries• Manage Contracts

Performance Management

• Spend Analysis • Savings Tracking

• Deal Tracking / Issue resolution• Procurement / Supplier Scorecard & KPI’s

• Compliance• Management Reporting and Programme Management

The Procurement function’s service offering is wide-ranging. The Inprova Group deliver and support in all areas.

The Procurement Shop Window

Private sector procurement often applies a classic, proven category management process.

Stage 1. Establish Business

Requirements

Stage 2.Analyse &

Plan

Stage 3.Source

Stage 4.Negotiate

Stage 5.Contract & Implement

Stage 6.Supplier

Relationship Management

Define roles & responsibilities

Request existing spend data

Define high level requirements

Note potential / preferred suppliers

Open risk log & define any

known risks

Business Requirements

Research the market/ RFI

Perform spend analysis

Update risk & issues log

Create list of suppliers

Analysis

RFP

Scoring

Shortlist suppliers

Final recommendation

Negotiate

Examine business impact

of sourcing options

Award Contract

Finalise contract & exit strategy

Handover to business service

owner

Supplier Selection

Final Recommendation

Signed Contract

Handover

Agree sourcing strategy & plan

Plan

Task

Output / Documentation

Approval Required

Key:

Develop Negotiation

Strategy

Supplier Segmentation

Supplier Scorecard

Quarterly Performance

Review

Supplier Relationship Management

Policy

SRM

SRM focuses on areas of development to capture and maximise potential value in the supplier relationship and ensure continued commitment from both parties to a first class service

What is SRM?

ProcurementThe Business

The Supplier

Why care about SRM?

• Helping to gain competitive advantage through improving the customer experience and reaching new markets

• Minimising supplier underperformance by creating real accountability and incentives suppliers to deliver business values that meet our corporate objectives.

• Value engineering by bringing together different advantages and core competencies of the supplier/buyer relationship.

• Improving supply chain efficiency

• Reducing business risk

• Reducing management overhead by streamlining supplier relationships, reducing customer complaints and the work associated with rectifying issues

• Collaborating on cost reduction56

What’s in it for you?

• Fewer complaints from customers to deal with

• Less ‘fire fighting’; Moves companies from re-active to pro-active

• You can directly influence supplier behaviours through scoring and feedback of their performance

• Being part of a cross functional team gives others a greater understanding and appreciation of your role

• A fast growing business gives rise to opportunities to develop your own career

Allows managers more time to concentrate on their day job

57

Segmenting suppliers is a good first step

58

Critical

Operational

High

Spe

nd

Low

High

Strategic

Business CriticalityLow

SRM starts with Supplier Segmentation and understanding how critical a suppliers service is to UKDN Waterflow

59

Strategic

Critical

OperationalOperational

High

Low

Spe

nd

LowHigh

Business Criticality

Strategic

Effective segmentation is based on level of spend and business criticality

Strategic Suppliers: Working collaboratively to build each others businesses rather then just reducing costs and increasing sales targets. If managed correctly would share innovation and ideas to drive mutual success in becoming market leaders.  Strategic Suppliers have a significant impact on UKDN Waterflow’s business.

Critical Suppliers: Niche market or products. Manage risk and ensure continued supply. Have a critical effect on UKDN Waterflow’s business.

Operational Suppliers: Providing standard goods/ services available from many other sources. Supplier failure may cause some inconvenience but not of a serious nature.

59

Working collaboratively to build each others businesses rather then just reducing costs and increasing sales targets. If managed correctly would share innovation and ideas to drive mutual success in becoming market leaders.  Have a significant impact on Virgin’s business.

Strategic Suppliers

Key to Managing Strategic Relationships Sourcing Activities Strategies

• Senior management buy-in & total commitment on both sides

• Long term agreements and business continuity plans • Optimise specifications

• Sharing intelligence: products, service, cost drivers & market • Joint product/ process design • Restructure relationships

• Continuity of supply. • On-site representation • Optimise total supply chain costs

• Collaboration on joint cost reduction, performance & innovative initiatives

• Monthly supplier relationship and performance management • Reduce lifecycle TCO costs

• Integrate supply chain processes between companies • Reduce transactions

Critical Suppliers

Niche market or products. Manage risk and ensure continued supply. Have a critical effect on Virgin’s business.

Key to Managing Critical Suppliers Sourcing Activities Strategies

• Research opportunities alternatives and substitutes • Long Term Agreements • Reduce consumption

• Reduce lifecycle including maintenance and operating costs

• Expand relationship & provide supplier incentives to be preferred customer • Optimise specification

• Build robust service level agreements into the relationships

• Manage risk within the end-to-end supply chain • Optimise supply chain costs

• Alignment with proactive suppliers • Understand market exposure and develop new suppliers • Reduce transactions

• Explore ‘Strategic Relationship’ options • Restructure relationship

61

Operational Suppliers

Providing fairly standard goods and services available from many other sources. May cause some inconvenience but not of a serious nature.

Key to Managing Operational Suppliers Sourcing Activities Strategies

• Total cost reduction/ value enhancement

• Agreements competitively tendered regularly • Consolidate Spend

• Speed of implementation • Pursue value add services that reduce costs • Increase competition

• Consolidate requirements to increase buying power

• Test the market regularly and provide rapid response changes • Eliminate / reduce transactions

• Increase competition • Consider outsourcing arrangements • Reduce consumption

Does it involve a key component to UKDN’s delivery to

our customer?

Does it involve direct contact with UKDN’s customers

(other than providing logistics)?

Involves processing or

having access to customer data?

Likely to be high risk in any other

way?

OPERATIONAL SUPPLIER

No

No

Are less than 3 suppliers in the market providing this

product/ service and where switching supplier would cause severe operating

issues/ delay?

Yes

Yes

Yes

Yes

Does it involve a material process where supplier

failure would cause UKDN severe

operating issues/ failure?

CRITICALSUPPLIER

STRATEGICSUPPLIER

Would partnering have the potential to deliver supply

chain efficiency, value engineering & strategic

value? (i.e. Have a positive impact on: competitive

position , brand awareness, speed to market)

No No No No

Yes Yes Yes

No

Screening Questions for Supplier Segmentation

Are there multiple suppliers where products can be

easily substituted at low cost within a minimal time

frame?

Yes

No

Note: This flow diagram should be used as a guide to segmenting your supply base, there will be ‘exceptions to the rule’ where you should use the other available tools and definitions to apply best judgement..

Understanding risk and applying the right level of supplier management

Relationship Management

Performance Management

Contract Management Management by Exception (E.g. Issue or risk arising/ likely to

arise)

Strategic Suppliers X X X X

Critical Suppliers X X X

Operational Suppliers X X

Supplier segmentation ensures resources and time invested in suppliers is allocated appropriately based on their criticality to the business

Risk Assessment Yes/No

Is the sourcing project likely to involve joint venture, joint alliance, joint branding or outsourcing?

Will suppliers will be in direct contact with UKDN Waterflow’s customers?

Does the supplier operate, either fully or in part, a process or a product critical to UKDN Waterflow’s business?

Does the supplier processes data on behalf of UKDN Waterflow? Might they retain this data or records after the processing is completed?

Does the supplier provide a storage service for data records?

Is this sourcing project likely to be high risk to UKDN Waterflow in any way not covered by the above?

If the answer to any of the above questions is ‘Yes’ suppliers should be ‘Management by Exception’ (see below).

Supplier segmentation should be completed in conjunction with an assessment of underlying risk.

It is a comprehensive task to attempt to change a culture founded on suspicion, confrontation, and inflexible attitudes, to one which favours and seeks: • Openness, co-operation, understanding and trust; • Equitable apportionment of risk and reward; and • Continuous improvement.

It also requires a process that provides:

Identification - of clear, mutually accepted objectives, which are stable and which encompass the key drivers of business. The achievement of objectives must be demonstrable and capable of measurement.

Partnering Forums - to initiate the partnering process. Goals and objectives for the project and for the parties will be aligned, and the ground rules of the arrangement established.

An Integrated Stakeholder Team made up of representatives from all partners.

Monitoring - to ensure that relationships achieve the objectives. Performance indicators will be formulated and an appropriate procedure agreed in the forum.

Partnering Principles (PPs) - that state the expectations of all partners, and the relationships they hope to achieve. It does not replace the contract, but is the forerunner to it and concentrates on working relationships.

A Framework Agreement - that takes the aspirations of the PPs and expands them into a comprehensive, legally-binding working document of the relationship, containing terms and conditions and all other contractual requirements. Communication - between UKDN Waterflow and its partner(s) on a frank and open basis. The structure of communications and relationships at all levels will be agreed in the Partnering Forum and recorded in the Partnering Agreement.

Risk Management - which identifies and allocates all known and expected risks to the parties best able to manage them. This means that the parties agree to avoid surprises, to communicate problems to each other immediately, and to work together as a single team to manage risk successfully.

Continuous Improvement - through seeking opportunities to improve performance.

Dispute Resolution - applying a jointly-agreed procedure for the resolution of contentious issues. The objective is to have an issue resolved at the earliest possible opportunity at the lowest level of authority.

PARTNERING ETHOSSuch cultural change requires:

Commitment - Openness - Fairness - Trust

Principles of partnering with strategic supplier

65

W o r l d

C l a s s

S t r a t e g i c

C o m m e r c i a l

T r a n s a c t i o n a l

Incr

easi

ng S

ophi

stic

atio

n

Buyers & sellers exhibit certain behaviours seen in the Relationship Pyramid

6666

Transactional Relationship

67

Transactional

Buyer’s Behaviour Seller’s Behaviour

Late payers Does not allocate any significant amount of resources to the account

Unimaginative Not bothered about quality of service delivery

Last minute panics Concentrates on price and uses time pressures to increase price

Adversarial Would be too bothered if they lost the account

Focus on price or discount Little understanding of the buyer’s requirements

Suppliers kept at a distance

Commercial Relationship

68

Commercial

Buyer’s Behaviour Seller’s Behaviour

More collaborative negotiations Welcomes approach but slightly complacent

Supplier suggestions listened to Feels that their contributions are valued

Care about service delivery arrangements Concentrates on service delivery

Limited pre-assessment of capabilities Takes advantage of lack of understanding

Seeks different solutions Looks to provide alternative services with large profit margins

Buyer’s Behaviour Seller’s Behaviour

Emphasis on relationship management Dedicated account team and considers the buyer as an important customer

Spends time with the supplier On site regularly

Designs costs out Looks to deliver added value

Regular supplier performance monitoring Greater commitment to analysing and fixing service failures

Supplier suggestions warmly received Shares research and development costs

StrategicA Strategic Relationship

Very few world class relationships exist outside the motor industry

World

Class

Buyer’s Behaviour Seller’s Behaviour

Dedicated relationship team with board level commitment

Dedicated account team with board level commitment

Very close links with strategic hauliers Economies of scale levered for buyer’s benefit

Active supplier development programme Service delivery and added value benefits delivered above and beyond the contract

Continual performance assessment Synergy

Hauliers encouraged to take the initiative Thought leadership

World Class

A World Class Relationship

7070

It’s important to remember how UKDN Waterflow view our suppliers and how suppliers view UKDN Waterflow

71

• Understand why SRM is important to UKDN Waterflow

• Establish roles and responsibilities for SRM

• Segment key suppliers

• Subcontractors performance baseline

Objectives for today

72

It is important to have a central UKDN Waterflow SRM policy governing the management of Strategic Suppliers

SRM policy • Owner [to be agreed – generally sits within Operations]• Supports a consistent UKDN Waterflow approach to SRM driving continuous operational

improvement and harnessing talent and ideas from key supply partners. • SRM policy incorporates various activities;

- Supplier Segmentation- Roles & Responsibilities- Balanced Scorecard- Supplier Meetings- Document Retention

Balanced Scorecard & Supplier Dashboard• Owned [to be agreed – generally sits within Operations]• Measures the performance of Strategic Suppliers• The scorecard & dashboard incorporate;

- A mix of quantitative and qualitative measures to develop two-way mutually beneficial relationships with UKDN Waterflows strategic carrier partners

- 360 view, scored by UKDN Waterflow, Supplier and Customer- Jointly reviewed with supplier - Action plan signed off by both parties

UKDN Waterflow Guidelines for Supplier Meetings are required to provide structure to meetings and support SRM Policy

Review and approval of Supplier ScorecardSupplier Name: [XXX] Review 1st Qtr Date of Supplier Review [xxxx]

ID Scorecard   UKDN Waterflow Cross-Functional Group Score Total Score Possible Primeline

Metrics Purpose Measures (TO BE UPDATED) Evidence provided by: Owning Team Weighting Score Weighted

Score Supplier Comments Score Weighted Score Score Weighted

ScoreSupplier

Comments

1Strategic Value

1.1Contributes effectively to business process innovation

Drive ideas and innovation to support 3-5 year business goals Track evidence of sharing ideas Operations 3 2 6 5 15 2 6

1.2Activly works to reduce supply continuety risk

Appropriate continuety plans in place to ensure customers receive orders on time in-full when an unexpected event occurs

BCM/DR Plans in place, regularly updated and tested Operations 5 1 5 5 25 2 0

1.3Supports and contriutes COMPANY's bid to enter into new markets

Ensure geographic coverage or growth plans support and develop COMPANY's 3-5 yr business plans

Both parties regularly share and develop long term plans Operations 3 3 9 5 15 2 6

1.4Makes a positive contribution to brand equity

Positive driver experiences increase customer satisfaction and perception of COMPANY supply chain

Completed and track customer satisfaction surveys/ No. customer complaints

Sales 5 3 15 5 25 5 0

2Financial Value

2.1Freight cost per kilo shipped (and/or no. cartons shipped)

Ensures savings initiatives and new tariffs deliver the anticipated savings,

Track Invoice values match agreed pricing contracted Finance 5 4 20 5 25 5 25

2.2Not more than 1 credit/ debit notes per 400 orders

Tracks losses and damages and ensures pricing accuracy to agreed tariffs

Track No. of credit/ debit notes does not exceed 0.25/ 100 Finance 3 4 12 5 15 5 15

2.3Price stability and commitment to on-going price reductions Commitment to COMPANY partnership Evidence of proactively sharing

ideas to reduce costs Operations 3 3 9 5 15 5 15

2.4Asset Utilisation Reviews opportunities to benefit from any joint utilisation of assets

Evidence of proactively sharing ideas to better utilise assets Operations 1 2 2 5 5 3 3

2.5COMPANY Incremental Revenue generated through implementation of new carrier strategy

Tracks supplier performance to change in revenue

Increase in volume orders / no. customers outside of COMPANY promotions/ marketing activity

Finance 1 N/A 0 0 4 4

3Operational Performance

3.1Timely delivery of linehaul trailers Ensures the daily load planning processes are adhered to

Track aginst contracted lead times Operations 5 1 5 5 25 3 15

3.2Timely collection of linehaul trailers Ensures the daily load planning processes are adhered to

Track aginst contracted lead times Operations 5 1 5 5 25 3 15

3.3On-time in full delivery to agreed lead times

Tracks the service provided in delivering orders to customers at the agreed time

Track aginst contracted lead times and no. credit notes for short orders

Operations 5 4 20 5 25 5 25

3.4Not more than 1 customer complaint relating to supplier performance issues per 400 orders

Provides qualitative score of driver performance and customer perception of COMPANY supply chain

No. customer complaints per 100 orders Sales 5 N/A 5 25 5 25

3.5Not more than 1 late outstanding PODs per 100 orders

Ensures invoice accuracy and adherance to timelines No.POD's per 100 orders Sales 5 1 5 5 25 5 25

4Relationship Quality

4.1Carrier Communication is meaningful, accurate and timely

Ensures carriers deliver meaningful accurate MI and other key information on time and in the specified format

MI is provided on time and in the specified format Operations 3 2 6 5 15 4 12

4.2Degree of mutual understanding COMPANY and the carrier understand each others objectives

Regularly reviewing each others long and short term goals

Operations 3 2 6 5 15 2 6

4.3Stratgic alignement continues to support objectives

Both parties objectives are aligned and support strategic goals

Regularly reviewing strategic objectives and aims of the strategic relationship

Operations 5 3 15 5 25 3 15

4.4Effective in solving problems/ issues when they arrise

Can recognise the need for improvement and drive change within their organisation

Timely resolution to issues and responsivness to suggestions/ complaints

Operations 3 2 6 5 15 4 12

  Total:         31 119 85 280 67 191 36% 43% 100% 100% 79% 68%

Illustrative Draft for review

On targetRequired attentionBelow expectation – required immediate action

KEYService improvement since last periodService decline since last periodService static since last period

Example Supplier Dashboard - For discussion

Overall [RAG]

Performance during period

Relationship during period

Quarterly Operational Performance

Quarterly Returns:

Quarterly Regional Spend/ Volumes

YTD Spend & Forecast per Quarter

Spend (YTD) £____ Forecast 2014 £____ Total No.Shipments (YTD) __

Key Messages & Opportunities for Improvement/ Innovation

Upcoming Dates for DiaryQuarterly performance review meeting dd/mm/yyQuarterly relationship review meeting dd/mm/yy

Q1 Q2 Q3 Q40

50010001500200025003000350040004500

0

1000

2000

3000

4000

5000

Series 1

Forecast

Spend Vs forecast to date

‘000

UK DE FR IT0

50100150200250300350400450500

Q2Q1 UK

56%

DE22%

FR17%

IT6%

Regional spend to date% Volume shipments by region

No. shipments0

500

1000

1500

2000

2500

3000

3500

4000

Q4Q3Q2Q1

Total No. shipments

£’00

0

Carrier: Period: Q1 February 2014

Actual Target Status

1. On-time delivery of linehaul trailers % TBA 97%

2. On-time collection of linehaul trailers % TBA 97%

3. On time in full (OTIF) delivery to agreed lead-times TBA 97%

4. No. customer complaints/ 400 orders TBA 1

5. No. late POD’s/ 100 orders TBA 1

6. Volume orders lost /damaged in transit / 400 orders TBA 1

7. No. credit Notes / 400 orders TBA 1

Reason Code Reason Description Volume Volume (%)

Cost of return shipment (£)

LIT Lost in transit TBA TBA TBA

DIT Damaged in transit TBA TBA TBA

PPYC Poor Packaging TBA TBA TBA

NCOD No COD TBA TBA TBA

NAP No access to premises TBA TBA TBA

IP Incorrect products TBA TBA TBA

Illustrative Draft for review

Today we need to agree ownership and target delivery dates to support SRM activity

DocumentationAccountable

TeamAction Timing Task Owner

Supplier Segmentation

Cross Functional Team

1. Segment Key UKDN Waterflow Suppliers

Today Contract Owners - To be agreed today / UKDN Procurement

SRM Policy Operations 1. Agree Ownership

2. Draft SRM Policy for review & feedback

Today

End May

To be agreed today

UKDN procurement

Scorecard Operations 1. Agree Ownership

2. Draft Scorecard for Key UKDN Waterflow Services

Annually (or by exception) Contract OwnersTo be agreed today

Dashboard Operations Create Draft Dashboard for Key UKDN Waterflow Services

Mid June UKDN Procurement/ Contract Owners - To be agreed today

Meeting Guidelines Operations Draft Supplier Meeting Guidelines for review & feedback

End May UKDN procurement

Questions