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6. SUPPLY CHAIN
THE CHALLENGE
Due to the ‘boom and bust’ demand cycle, the UK rail supply chain struggles to sustain and develop the resources to deliver the scale of work needed for the railway sector to renew, grow, and remain competitive. Challenges including skills shortages, inconsistent funding, and competition with major programmes in other industries have historically impacted the industry’s ability to sustain capability, to innovate and deliver value for money. High costs and lack of competition in major schemes such as re-signalling and electrification are commonly referenced as an indicator of this failure. However, this is not solely an issue of demand. The supply chain must also take responsibility for delivering differently, challenging convention, and looking beyond tradition.
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SMEs, consultants, and universities play a vital role in the development and continued existence of a vibrant, successful innovation ecosystem that delivers 'local solutions to local challenges6. With agile structures, working practices and decision-making systems, SMEs are often best placed to rapidly develop, deliver, and scale new ideas.
Historically, however, it has been challenging for SMEs, particularly start-ups and new entrants from other sectors, to become established in the UK rail market. Programmes and their procurement processes are not always designed to enable organisations with new and innovative ideas to participate. Mechanisms for managing and controlling risk present a challenge in bringing new organisations and innovation into a programme, often favouring known solutions.
Common mechanisms employed by the industry for leveraging innovation, such as Accelerators, Incubators and Hackathons, are often aimed towards start-up companies. However, it is also important to remember that not all SMEs are start-ups. Such initiatives are not always attractive or beneficial to established small businesses that have developed structures and working practices that drive innovation. For these organisations, often already with a strong network within the sector, access to funding, knowledge from industry experts and the ability to enter into simple, mutually beneficial partnering agreements are more critical to their success in delivering innovation.
6 HM Government (2018) Industrial Strategy Rail Sector Deal, Crown Copyright
RECOMMENDATIONS
The barriers to entry for new and smaller organisations in the UK rail industry are well recognised. Yet it is in our collective interest that the innovation value offered by SMEs, consultants and universities is rewarded and recognised. To support this, we recommend that TfN develops a strategic plan, like that developed by the Greater London Assembly and Transport for London, setting out how the inherent capability of smaller-scale northern suppliers will be realised and harnessed for the benefit of the north.
The plan should consider how to successfully engage smaller suppliers in early supply chain activities and include them in the larger contracting mechanisms ecosystem. One approach would be the establishment of a TfN or regional enterprise led support framework for high potential smaller business, focussing on facilitating partnerships with Tier 1 suppliers. This would build on the success of national schemes such as Open Doors and regional best practice, offering access to:
• Opportunities for members to collaborate when bidding for new business • A regular programme of challenge led
Accelerators/Incubators • Exhibiting collaboratively at trade exhibitions • Mentoring from industry experts and business advisors.
Steps should be taken for northern clients and Tier 1 suppliers to adopt 'Procurement Lite' processes, making it quicker and more efficient for SMEs to pre-qualify and submit tenders for opportunities in the north.
Defining Key Performance Indicators (KPIs) to monitor the number and proportion of SMEs in the TfN supply chain can help to increase the value of regional spend with SMEs. Setting KPIs should also incentivise Tier 1 businesses to engage and collaborate with the wider supplier community, thereby creating an environment where innovation can be driven upwards to TfN.
