Rail Industry Focus

03.09.19

A mutually beneficial supply chain

Source: RTM August/September

A complex supply chain and a new control period provide opportunities for solution-focused SMEs, argues Rob Morton, supply chain operations director for Network Rail.

Our suppliers have a vital part to play in running Britain’s railway as Network Rail becomes more customer-focused and service-driven. We are devolving further to become more responsive. There is a stronger focus on performance, and our teams are working hand in hand with suppliers to achieve this. Improving passengers’ experience is pivotal to all we do, and suppliers who adopt the same ethos are most likely to succeed in winning business from Network Rail. 

For the next five years, Network Rail has a projected third-party spend of £30.9bn to cover renewals, capital works, goods and services. In Route Services, Network Rail’s central directorate that supplies to the routes and regions, we spent around £3bn with the supply chain in 2018/19. Control Period 6 (CP6) is a land of opportunity and not only because of this spend. The railway has arguably Britain’s most complex supply chain, working 24/7/365, often in hard-to-reach places, impacting millions of customers and with multiple stakeholders. This brings challenges but also enormous possibilities.

Network Rail’s route businesses need confidence that the services they use are reliable, flexible and value for money. In supply chain operations we are aiming for ‘double 9s’, or 99% service as a minimum for everything we do. We need supplier partners who can tangibly demonstrate this. That doesn’t mean solely organisations who are big, traditional suppliers to the rail industry. Of course we will continue working with such organisations. But just as important are SMEs and companies new to this sector. We welcome new insight, new technology and new thinking to the railway. As for smaller companies, we are looking to target a minimum of 33 per cent of our spend with SMEs by 2022 – ideally organisations who can work locally with our regional teams. 

Our new road fleet contract is one example of how we can support local supply chains. We have the eighth largest road fleet in the country, and as of August this year we moved from 16 separate central contracts to a one-stop-shop for integrated road fleet management with Hitachi Capital. That could look like another big central contract. But Hitachi Capital will use hundreds of local smaller garages and repair agents to keep our road fleet in excellent condition. A key objective of that deal was to maximise the use of local SMEs. 

New deals must be mutually beneficial to maximise longevity and successful delivery. There is not enough ‘skin in the game’ for our suppliers. Suppliers have previously told me that we were difficult to trade with, and we have listened to this feedback. We are putting this right but still have much to do.

We are removing barriers that have made it difficult to work with us. For low-value and low-risk procurements we are removing 50% of pre-qualification questions. We will also remove requirements for parent company guarantees and the obligation to meet a financial strength threshold. We have published a pipeline of procurement for CP6 and have clearer instructions for participants as well as a fair payment charter. Contract lengths are also changing, with some traditional five-year framework contracts switching to longer deals. We can move away from the five-year cycle and allow suppliers the freedom to fund investments and capital purchases in a way that is easier for them.

I invite suppliers to work with us, prioritising network service performance for passengers and freight operators. Those who do have a great opportunity and I look forward to working with them.

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