Thames Water brochure – January 2018

Thames Water

A supply chain transformation PR O J E C T PA R T N ER

Thames Water A supply chain transformation Written by Dale Benton Produced by Richard Durrant

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Thames Water, the UK’s biggest water and sewerage company, has undergone a radical supplier transformation of late, as the organisation looks to match the quality of its network with a level of service that delivers

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s one of the largest utility companies in the UK, serving more than 15million customers on a daily basis, Thames Water has a clear responsibility to provide essential services that are of the highest quality, and it can successfully do so through a strong and reliable supplier network.

However, managing a network of suppliers and contractors that encompasses around 12,000 people working directly for the organisation or as part of a thirdparty contract can prove difficult.

It was not so long ago that Thames Water was consistently ranked the lowest in the annual supplier satisfaction survey from British Water. Fast forward to 2017

however, and Thames Water now ranks within the top two and has won a number of major awards, (including Construction Client of the Year and the Supply Chain Excellence Customer Service award).

The reason for the historically low rankings, as Jon Loveday, Group Commercial Director explains, was a lack of any real commercial strategy, the supplier contracts and company goals were misaligned and there was a deep rooted belief that suppliers represented lowest cost and could not provide a value proposition.

“I wasn’t brought in to develop a strategy initially, I was tasked with managing Thames Water’s existing suppliers,” he says. “Thames Water was seen as an aggressive client

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and difficult to deal with. It was a contractual approach and disputes were commonplace that really didn’t leave room for developing any form of rapport or solid relationship between the organisation and the suppliers.

“It was really hurting Thames Water and all parties overheads were growing to deal with the mistrust”.

It was through Loveday’s role in managing that supplier network that he and the organisation identified an opportunity to create a transformation strategy, one that would significantly change the way in which Thames Water operated from top to bottom.

To put it simply, Loveday set out to create a standalone commercial function for Thames Water and in order to do so, the first order of businesses was to quickly settle a number of disputes between the organisation and its supplier network. This, Loveday points out, allowed the organisation to remove pain points in order to focus entirely on proper commercial management of key contracts.

One of the first transformations took place in the waste network, a

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contract which oversaw the crucial maintenance of all the sewers across London and the Thames Valley area.

“At the time he joined the programme had around 7,000 customer facing jobs in backlog, a significant level of distrust had built up between the contractors and the Thames Water employees meaning that not enough time was be focused on the problem at hand. Planning and execution was disjointed and too much time was spent on checking whether jobs were valued and paid for correctly rather getting the job done expediently for customers”.

For Loveday, the task was to realign the organisation’s approach to the supply network in order to establish a more mature, integrated contract.

This initially involved much closer and open working with the suppliers, creating a culture where challenges were approached together.

Performance management and subsequent actions were carried out jointly through tough weekly sessions. This established a sense of order and soon the operation got back to a managed level. Since then

“It was critical in getting not only the Thames Water people aligned but more importantly, getting the suppliers aligned around one vision” – Jon Loveday, Group Commercial Director, Thames Water

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the Thames Water and supplier teams have become co-located in a purpose built centre. KPIs and the commercial model have been refined and aligned.

“We’ve got to a point now where we have a very mature contract and very, very mature commercial model which is the envy of the industry,” says Loveday.

It would be easy to suggest that the sole driving force behind the transformation of Thames Water’s whole approach to its supplier network is just improving the relationships and focusing on the bottom line.

Loveday, though, is keen to stress that the transformation was born out of a base level need to improve the company’s operational performance.

Thames Water, as noted previously, has more than 12,000 people working every day on its assets, including 5,000 direct staff, but with no commercial strategy in place it was clear that there was also something else missing: alignment.

“Previously there was a focus on the direct staff, despite the large numbers of contractors we

had working on projects for us,” says Loveday. “We just seemed to ignore them and yet many are in customer facing roles.”

Loveday set out to and rebranded all of the customer facing roles so that everyone wore the same uniforms and drove the same vehicles. It made commercial sense, but also from an operational and customer perspective is started to align behaviour towards customer service instead of the individual needs of companies.

Next up was alliancing, for Loveday, was very symbolic as it represented a new way of working, shared outcomes rather than traditional rate-based contracts.

“What we did from a behavioural standpoint is align people to a new vision for the organisation, a new set of values,” he says. “It was critical in getting not only the Thames Water people aligned but more importantly, getting the suppliers aligned around one vison.”

By establishing a more alliance based approach, this allows Thames Water to create more customer focused contracts that enables more

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effective and efficient suppliers, all team have created a suite of leading whilst critically reducing the amount analytics capability and tools. These of overhead that was historically include spend analytics with circa building up on both sides. £7bn of historic spend and £3bn of As a leading utility within the UK, future spend profiled and commodity Thames Water’s funding is regulated, price tracking. More and more of and so reducing overhead spending the frameworks are now procured and realising cost savings wherever and managed by the Thames team possible is crucial in the continued which its partners then use. success and transformation “We’re using this data of the organisation. along with some clever To that end, analytics. It’s helping Loveday’s us to understand our commercial spend now and how team has taken it is likely to influence procurement to our future spend, the next level. be that on future Number of employees at Thames Water Behavioural projects or even future procurement internal programmes,” techniques are now says Loveday. standard in much of Thames Water has also utilised what Thames Water do, this is a cutting-edge performance tool because having the right people called Pulse. Pulse provides realis in many ways more critical than time tracking of the organisation’s the right price. Thames Water performance and provides rightly focus on working safely Loveday with a clear picture as and creating an environment of to what the organisation is doing innovation as well as price. in terms of spend, project time, Data and analytics play an and more importantly, where important part. The commercial savings are being made.

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“Through the use of these tools, we are tracking every day just how well we are performing and how well we could perform,” he says. “They help us achieve what we want to achieve, cost savings, signing of contracts, but also we know if we don’t sign a contract exactly how much its going to cost us. They are really powerful tools.”

All of this granular data has enabled a level of understanding of the true cost of operations that only a short period ago was hidden. This has led to another of the major successes Loveday has overseen at Thames Water, the creation of the Logistics Management Centre, (LMC). The LMC now manages the majority of the supply chain operations for Thames Water and a number of its partners. With five warehouses, eight forward stock locations, stock is dynamically managed and distributed. Where is it beneficial to do so Thames Water buy, maintain and distribute their own plant. The function provides a 24/7 response to emergency bursts and floods across the patch. By cleverly utilising specialist vehicle assets to their full potential the LMC have delivered significant savings to the business (circa 15-30% across all activities). “the true cost of logistics was hidden with separate contracts, what we have discovered is that we can plan better, react quicker and run logistics vastly more efficiently by

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pooling resources across all the business units and supply chain.

We have plans to triple the size of this function next year”.

The transformation of Thames Water is an ongoing process. The organisation has already seen success, the very same survey in which it was failing has now ranked it within the top two utility companies in the country.

Loveday is all too aware that for any transformation of this scale, the real measure of any success, particularly one with a supplier network like that of Thames Water, is the response from those suppliers and contractors where the relationship was previously non-existent.

“We’ve had a real positive response,” he says. “We’re trying

to get people that are going to be compatible with our values and our goals and ways of working, and to make these alliances a success. So, it’s not just the clever commercial models, it’s actually taking it to a people level to try and give these things a head-start because any contract is only as good as the relationships you’ve got and those relationships take time to develop.”

And time it will take, but Loveday can already see a change in fortunes for Thames Water.

“There are a number of large suppliers that previously wouldn’t work for Thames Water, and now they do. This is because of our historic aggressive approach that we have worked so hard to transform,” he concludes.

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