Improving how the supply chain works together
A collaborative and inclusive approach to supply chain management will promote more innovative thinking within the construction sector and increase community benefit.
Supply chain engagement and collaboration during the earliest stages of procurement strategy development can have a significant positive impact on the eventual procurement and project outcomes. This early collaboration, particularly across major or complex programmes, can be vital in realising the most value from the procurement process, write Michelle Mortlock and Nicholas Hives-Condon.
In September 2021, the Infrastructure and Projects Authority published the National Infrastructure and Construction Pipeline 2021, setting out projected investment of nearly £650bn in the UK’s social and economic infrastructure. To deliver all these projects and programmes, the UK construction industry will need to upskill its workforce, invest in new technology, find innovative ways of overcoming any resource scarcity, and be more consistent in delivering major assets on time and within budget.
Modernise or Die: The Farmer Review of the UK Construction Labour Model (2016), commissioned by the UK Government, made several recommendations that are considered necessary to transform the industry and its ways of working. One recommendation is for contractors, clients, consultants and government to improve relationships and collaboration across the supply chain. At Mott MacDonald, our procurement specialists have been assisting clients to create an environment for a more collaborative supply chain, developing this capability early within the procurement process to help reduce project risk and realise the opportunities that a collaborative approach can bring.
Traditional versus collaborative approaches
Based on our own experience, the reasons why procurement organisations may fail to engage with the supply chain during the earliest phases of the procurement strategy process include:
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A lack of resource bandwidth to properly facilitate this process
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A failure from project stakeholders to engage procurement teams early enough, which does not allow for sufficient time to deliver well-structured early engagement
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Concerns that early supply-side engagement could undermine the objective of a truly compliant and equitable procurement process
In such instances, there has been a tendency to apply a more transactional model to procurement involving a rigid approach driven by a ‘minimise risk at all costs’ mindset, and often not engaging collaboratively with the supply chain until the procurement is about to be formally launched.
There is a perception that this ‘off the shelf’ approach is easier and perhaps faster to implement. Such an approach may be appropriate for projects where the project scope and delivery are relatively simple. For major or complex projects, however, it is our experience that there is considerable benefit in engaging and collaborating with the supply chain earlier to capture valuable technical insight and supply market intelligence, and identify the collaborative capabilities needed.
Investing in a collaborative approach early in the process, underpinned by the collaborative principles of ISO 44000, can save time and reduce potential risk later in the project which may otherwise result in considerable consequences for project delivery. Applying collaborative principles – such as relationship management, business objectives, information and knowledge sharing, and value creation – can help enable development of this collaborative environment early, prior to commencing formal procurement, and in doing so, set the tone for a more collaborative working approach for eventual contract delivery.
Early supply chain engagement – lessons learnt
Our experience in this area has identified key lessons for successful early supply chain engagement and collaboration:
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Leadership – The commitment and engagement of senior stakeholders to a more collaborative engagement methodology for supply chain management is a key success factor.
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Relationship management – The importance of both 2nd and possibly 3rd tier suppliers to the successful delivery of programmes. This drives the need for effective, collaborative cross-supply chain relationships and engagement.
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Knowledge and information sharing – There is often a genuine appetite within the supply chain for a more inclusive way of working that facilitates the sharing of ideas, suggestions and lessons learned.
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Value creation and innovation – Encouraging supplier-to-supplier collaboration during this process has the potential to deliver considerable benefits to all parties – eg identification of geographical or technical synergies.
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Collaborative competencies – The use of a structured approach to early contractor engagement utilising a multifunctional programme team can be a substantial enabler in the development of this collaborative capability and realising the associated benefits.
Collaboration across the supply chain
Engagement with members of a potential supply market prior to commencing the procurement process, if not conducted properly, could undermine a fair and equitable procurement process. This risk can be sufficiently mitigated by applying a structured and carefully managed engagement approach.
Working with our clients, we conduct a series of internal stakeholder workshops to formally capture and prioritise programme objectives. These priorities are likely to include technical, commercial, timeline and sustainability aspects. By building this collective and prioritised picture, the foundation for a suitable procurement strategy can be developed. Only after this stage is a structured supplier market engagement commenced.
Subsequently, a blended team of programme, technical and procurement specialists is established to plan, develop and conduct this early engagement. Supported by desktop research, typically this stage will comprise of supplier meetings, industry day events, high-level design reviews and site visits.
Informing the supply chain architecture
If we ensure the principles of collaboration are embedded within this early supply chain engagement process, an inclusive and collaborative environment can be created. This will inform the supply chain architecture and provide a rich insight into the supply market, be it at local, UK and/or international level, from which a suitable and best fit supply chain can then be developed.
The outputs of this collaborative working generally include:
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Development of a supply chain map across all key spend categories associated with the programme and identification of supply chain risks or potential bottlenecks
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Identification of critical technologies and capabilities across the supply chain
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Identification of emerging technologies that could potentially be included in any longer-term procurement strategy
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An initial assessment of overall supply chain capacity to deliver the programme
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A view of construction risks and potential mitigations
Adopting a structured and more collaborative approach to supply chain planning and the development of long-term supplier relationships provides an exciting opportunity to support the transformation of the UK construction industry. In this way, we can capture important market intelligence to inform the procurement strategy earlier and start developing the collaborative capability needed within and across supply chain communities to effectively deliver the infrastructure pipeline.
Pre-procurement engagement can deliver substantial benefits to all parties involved and inform the development of a more sustainable, collaborative supply chain community that will successfully support programme delivery and achieve greater value for our clients, our customers, and the communities in which we live.
This article was first published in the 2022 edition of The Partner, the magazine of the Institute for Collaborative Working.