Supplier assurance programmes
Industry could save £35million a year by working together to improve its arrangements for assuring the supply chain.
How does an organisation ensure that its suppliers have the right competence and resources to consistently deliver their products to their right specification?
Arrangements to generate supplier assurance provide the confidence that buyers and suppliers need to have in each other when working together to manage the risks in the supply chain. The need for assurance becomes more crucial when dealing with higher risk, safety-critical products and services.
Generating this assurance costs time and money so there is a need to get it right, and an opportunity to reduce costs and see better business performance by reviewing and improving current arrangements.
Why do we need supplier assurance?
- To comply with legislation
- To demonstrate management and control of risk
- To respond to learning from operational experience
- To make procurement more efficient
- To support management of mutually beneficial buyer-supplier relationships
- To foster continuous improvement in the business and across the railway system
The GB rail sector is a big buyer, relying on thousands of suppliers of every shape and size. These can range from international corporations to one-man-bands, dealing with almost anything you could imagine, whether it's new trains, complete major infrastructure re-modelling, or diving expertise for inspection of the foundations of the Forth rail bridge.
Buyers are responsible for controlling their supply chain risk. Supplier assurance is used as part of a buyer's safety management system to assess a company's capability to consistently deliver their products and services to their spec. It also supports good procurement practice by providing buyers with a pool of capable suppliers for tendering purposes.
The modern rail industry has numerous buyers seeking to procure from a common supply chain. For higher risk goods and services, there is a need to have proof that suppliers' credentials are met, including, where necessary, having this formally assessed and certificated by third parties – such as
RISAS. By way of example, we will pay much more attention and want more confidence if we're buying services that have a bearing on our personal safety and wellbeing (electricians, car maintenance), compared to generic low-risk products (office stationery).
Why does industry want to improve arrangements?
For many years, suppliers and customers in rail have found fault with the complexity and cost of supplier assurance.
An unintended consequence of privatisation and European liberalisation was that the corporate knowledge about assurance built up in British Rail was lost. Arrangements became scattered and more numerous, being delivered by different organisations and third parties, leading to a lot of duplication. There was no system level thinking about how the supply chain could be risk-based and cost-efficient. The problem has persisted to the present day, assessments are
still being duplicated.
We researched the issue, and working with Arthur D Little, we have shown that there is an opportunity to realise an estimated annual time-cost saving of £35m per annum. This equates to about 375 'person-years' of effort, by making arrangements more simple, effective and efficient with the added bonus of building a sustainable supply chain in the process. The whole industry, including Network Rail, train operators and suppliers, now wants to work together in a much bigger way to start accessing these savings. The potential benefit for the rail industry is improved safety at less cost, and the benefit for suppliers is better support from its customers, and potentially world class assurance credentials, breaking down barriers to market and generating new export opportunity.
For further information, please review the
Securing Supplier Assurance guidance document.
You may be interested in reading our research, which was conducted with Arthur D Little, (project reference T833).
More details about our research can be found on SPARK .