Ken Gedman; Hawksley Consulting; Utility Management ConsultingIn May 2015, featured an article from Ken Gedman, Principal Consultant, discussing how to drive real efficiencies in the current five year water industry planning period. Ken looks at the power of better strategic thinking and cross boundary collaboration.

Having attended an event that examined challenges in UK construction sector, a number of issues identified resonated in terms of how the water industry is and has been addressing these challenges in preparation for AMP6.

All but a few water companies have now secured their supply chain partners to deliver the multi-million pound programmes of investment from this year to 2020, to maintain their assets and deliver the service and outcomes promised to customers.

“Seeking greater collaboration outside of individual frameworks contracts or regions may be a route to drive innovation to the scale required.”

Indeed many supply chains were established well before the start of AMP6 recognising that early engagement supported the preparation of business plans, programme and category expenditure. It also provided an opportunity to stimulate innovation and development of initiatives to deliver +20% efficiencies.

The UK government’s Infrastructure Cost Review has targeted an overall 15% efficiency. The review recommended an overhaul of procurement, improved collaborative behaviours, integrated supply chains, projects grouped into programmes and greater application of performance-based specifications.

So in comparison with the rest of the construction sector, we could say the water industry is in pretty good shape. Improvements in programme management are creating upfront efficiencies not just in Capex but also on a Totex basis. Disciplined approaches to programme management have given greater access and visibility to programmes.

Supply chain arrangements for AMP6 have been established with a greater intent of collaboration. Commercial arrangements look not only to reward delivery of efficiency targets, but also to drive greater certainty that outputs will ultimately deliver the desired customer outcomes. Organisations have also focused on driving savings through innovative approaches and efficiency levers. Looking to other sectors such as the automotive industry, companies are adopting more manufacturing approaches, rationalising and standardising products, leading to leaner maintenance and faster delivery.

For most, this brave new world is new. There is still a huge amount of work needed to embed these principles and realise projected benefits. But are we being brave enough? What must be our focus to mature these approaches and deliver efficiencies from these new ways of working in AMP6?

Effective governance needs clear accountability across a minimum of interfaces. Rationalising interfaces within supply chains is a maturing approach. Adopting the right collaborative behaviours will sustain clarity and efficiency. Embedding lean processes also drives clarity and efficiency. This requires new skills, discipline and a platform for continuous improvement. Up-front analysis to support batching and portfolio management will support greater efficiency.

Supporting the supply chain to deliver efficiently, by creating visibility and access to programmes requires greater collaboration between commissioners and the supply chain. We need to avoid reverting to unnecessary mini-competition or piece-meal approaches, which lead to uncertainty and stifles efficient solutions. Putting innovation at the heart of procurement, by focusing on value, delivering outcomes and not preconceived solutions, is critical.

Innovation needs to be stimulated on a much grander scale in AMP6. Barriers to innovation must be reduced. Without any immediate, central investment in innovation afforded to other regulated sectors, the water industry as a whole must think smarter. Seeking greater collaboration outside of individual frameworks contracts or regions may be a route to drive innovation to the scale required. By framing innovation to deliver outcomes not outputs and by adopting standards that facilitate innovation – not constrain it, the industry can create a platform that is truly seen as innovative.

The next five-years is a definitive period of transformation in the industry. The journey has only just begun. Our challenge is to be a little braver, be more strategic in our behaviour and embrace the change to the brave new world. If we do, we can become a clear example of world-class delivery.

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