06.10.17
NR to start ‘conscious shift’ of spending away from large companies
Network Rail is not interested in taking a traditional approach to rationalising its supply chain, but rather wants to maintain the same number of suppliers in the industry whilst shifting spend away from bigger companies and into SMEs.
Speaking at the TransCityRail (TCR) North conference yesterday, Andy Haynes, the infrastructure owner’s contracts and procurement director, who at TCR last year discussed route devolution for the first time, said he does not intend to shrink his organisation’s pool of suppliers – despite the fact that most people would look to take that approach.
“Typically, somebody in my position as contracts and procurement director would say they want to rationalise the supply chain, that it’s not good to have so many suppliers,” explained Haynes. “And my message to you today is, that’s not what I intend to do.”
Taking delegates through the reasons as to why this traditional approach is “probably not the right one for the rail industry at the moment,” he said the stimulation of training and education via the creation of 30,000 new apprenticeships by 2020, as per the government’s growth agenda, plays a key role. Network Rail will be looking to suppliers that have over 250 employees and contracts worth more than £3m to contribute to the goal of hiring thousands of new trainees by 2020.
But the ambition to strengthen links with smaller companies and harness the innovation they can bring to the sector is also a fundamental element of Network Rail’s decision to retain a large supply chain.
“The government also realises the importance of SMEs, as we do,” Haynes added. “We will aim to move our supply chain from something like 16% of organisations with fewer than 250 staff to something like 26% in the next three years. So we’ll have a conscious move in expenditure away from large organisations to SMEs.”
One of the ways through which the infrastructure owner is starting to really capitalise on SMEs is via devolved routes. Since speaking about the idea at TCR last year, Haynes said Network Rail has already appointed route managing directors who are “much more in a driving seat now.”
“They have the authority to place contracts and are putting together and negotiating their CP6 plans with the regulator to get devolved route settlements,” he explained. “More than ever, we’re moving on devolving power away from the centre of Network Rail to businesses that are aligned with the freight and train operating companies.
“What that means is we have embarked upon a transformation that will ultimately change the whole face of the industry – a transformation organisationally as well as culturally. It would be very remiss of me to miss the opportunity in front of our suppliers to say we want to drive that kind of culture into our supply chain as well, a culture of customer focus and one where the supply chain reflects the focused objectives of the clients.”
Network Rail is also focusing on opening up the industry, such as by making sure its standards are available to suppliers and customers. The organisation is also keen to reward people who can bring better insights to how standards operate, said Haynes: “We’d like to set up arrangements where if you can have a look at an NR standard and change how it operates while maintaining safety and operability, there’s a reward there for doing that. I know lots of our consultants have views on safety and lots of our suppliers have views on how our standards operate, and we want to make sure those good ideas can get converted into a commercial benefit.”
As well as changing from the inside, the infrastructure owner is delivering on the ground thanks to the support it gets from the supply chain.
“The world is crescendo,” added Haynes. “In the last 18 months, there was a crescendo of major projects that are delivering and will start to deliver benefits to passengers.
“It’s a very vibrant time in the rail industry itself. We’re still negotiating our CP6 settlement, but ultimately I think the government realises that putting money and investment into the industry has a double benefit: it creates economic growth when these big projects come off, but it also pumps money into the UK economy.”
Speaking to the RTM team later in the day, Haynes said TCR was a great opportunity to meet more of these SMEs who Network Rail will be looking to invest in going forward. “I’ve had half a dozen people queuing up to have a conversation with me [at the event], I’ve got a fistful of business cards.
“It’s that grassroots connection to the suppliers that’s absolutely essential for somebody like me to see what the reality of life is for our suppliers, to bring to life the objects I have.”