Materials Management ‘Stores Outsourcing’ Tuesday 27 th January 2009 Shaun Aldis - PowerPoint PPT Presentation

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Materials Management ‘Stores Outsourcing’ Tuesday 27 th January 2009 Shaun Aldis PowerPoint Presentation
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Materials Management ‘Stores Outsourcing’ Tuesday 27 th January 2009 Shaun Aldis

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Materials Management ‘Stores Outsourcing’ Tuesday 27 th January 2009 Shaun Aldis

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  1. Materials Management ‘Stores Outsourcing’ Tuesday 27th January 2009 Shaun Aldis Director of Property Services Repair and Maintenance in the 21st Century

  2. Historical Context • Wolverhampton Homes:- A.L.M.O. established in October 2005. • Large unionised multi-disciplined in-house DLO – approx 300+ operatives – gas/ electrical/ asbestos/ voids/ response repairs/ programmed/ special projects. • Cultural Change • Internal and External Pressures regarding VFM

  3. The Scope of the ReviewThe scope looked at:- • How the service was currently provided • The size and scale of the existing operation • Need to meet future vision & core business decisions • How the service needed to change and provide support to a 2/3 star organisation • The quality and capacity of the existing service • ICT implications and major investment needs • Accommodation issues; rent/ site redevelopment • Value for money and efficiency issues • Comparison exercise; what do others do & why? • And more importantly what was best for Wolverhampton Homes

  4. Background/ IntroductionPosition Statement The large ‘in-house’ stores operated with:- • High overheads (24-33%) • Turnover of approx £3.5m per annum • Unsustainable high staffing levels and associated costs relative to turnover (18+ staff) £194k turnover per operative • Unacceptable short term investment needs (ICT) • Poor stock control, wastage/damage and turnover • Unknown ‘leakage’ levels and poor audit controls • Operated with in–efficient transport and fleet • Unable to provide or demonstrate the potential to deliver a service capable of underpinning a 3 star housing organisation

  5. Procurement Model and Options • Fundamental Service Review linked to Asset Management and Procurement Strategies • Detailed Options Appraisal :- Option 1 :- Retain the Current Service Option 2 :- Strategic Supply Partner (OJEU route) Option 3 :- Office of Government Commerce (OGC Framework) Option 4 :- Procurement for Housing (pfh)

  6. Option 1:- Retain Current Service • The level of investment need • The size and scale of the existing stores to meet our future core business – ‘speed of change’ • Development and regeneration of the Hickman Avenue site (registered head office) • Risk management issues: on-costs affects the viability of other ‘in-house’ service sections • Outdated and inefficient working practices and procedures (double handling and in some instances treble!) • Audit, tracking and process system weaknesses

  7. Option 2:-Single Strategic Supply Partner (i) • Wolverhampton Homes level of spend would attract OJEU notice • Robust test and explore the external market • Through its cost/ quality model the best solution for Wolverhampton Homes business objectives would be sought and obtained. • It would embrace new technology • It would provide an integral material delivery and fleet solution – smarter working. • Partners with specialist Market place experience

  8. Option 2:-Single Strategic Supply Partner (ii) • Service providers can provide new innovative solutions tailored to Wolverhampton Homes specific service needs • It would provide shared incentive schemes and annual efficiency statements • A long term partnership agreement could be developed • The appointment and evaluation process would involve representatives from a range of all stakeholders :- Unions/ Customers/ Board members

  9. Option 3:-Office of Government Commerce • Provides the opportunity to adopt a national ‘buying solution’ • It offers public sector organisations flexibility to buy discounted prices. • Limited time period • It would restrict Wolverhampton Homes to two specific suppliers:- excluding local company – potentially unique situation

  10. Option 4:-Procurement for Housing (i) • Procurement for Housing is a national purchasing organisation for the social housing sector. • It uses its collective buying power to achieve the best possible supply terms. • The consortium was initially set up in 2004 • The purchasing route utilises purchasing cards (similar to a credit card) that are issued to operatives.

  11. Option 4:-Procurement for Housing (ii) • Would involve more than one supplier • Aimed at relatively small housing organisations that manage a stock in the region of 1000 units • Suited to a dispersed stock over a large geographical area. • Potential lack of standardisation and sustainability of materials and goods • Does not lend itself to a ‘complete solution’ for example delivery of goods to site etc. • Requires additional supervision for audit purposes.

  12. Partnership/ Contract Details • Type of Contract:- Term Partnering Contract (TPC 2005) • Contract period /term:- 5 years (+2 year option to extend) • Procurement Route:- Official Journal European Union (OJEU) Procurement/ Restricted Tender Process • Detailed Implementation Action Plan

  13. Evaluation Model • Based upon 60% quality 40% cost • 4 key stages:- • 1. The Term Proposal (51%) • 2. Financial/ Tender Submission (40%) The Price Framework :- Extensive basket of specific materials (700+ items) • 3. Formal Presentation and Interview (5%) • 4. Reality Check and Site Visits (4%)

  14. Challenges • Staffing:- HR/ employment relations/ TUPE/ REM and Union/ Staff Transfer Consultation • Cultural Change for ‘in-house service’ • Mobilisation Period and Risk Management • Operational Change -more disciplined • Identified poor historic operational in-efficiencies - previously ‘masked’ • Capturing of all service requirements- avoid surprises • Ambitious but realistic procurement timetable

  15. Efficiencies • Reduction in low value and short term contracts (replaced approx 35) • Consolidated Invoicing ; financial management savings • Operating with reduced staff –( 40% reduction- turnover around £300k per operative) ) • ICT hand held technology- PDA’s (Northgate) • Operational efficiencies driven by KPI’s • Greater flexibility for innovation –material standardisation and rationalisation • Better control of materials for sub-contractor and partner organisations

  16. Outputs (i) • Did not limit or restrict the market place • Avoids repetitive tendering high number of small value, short term supply contracts • It will demonstrate value for money, savings and efficiency gains • Overcomes the site/ accommodation/ staffing difficulties • Process savings through electronic purchasing and invoicing • Accommodates sustainability and standardisation • Centralised billing and single point of contact • One sole provider for consistency of service

  17. Outputs (ii) • Avoids double handling and removes the dormant costs of stock, ‘leakage’ and write offs –reduces risk. • Accommodates a long term partnership agreement :- maximum 7 year period • Wolverhampton Homes does not specialise in materials management – conscious decision • Provides greater efficiencies and vfm gains for other ‘in-house services’ – more competitive • Increased purchasing power of the supplier • Help the existing workforce develop in an organisation that specialise in materials management

  18. The Future • True Partnership Agreement • ‘Open Book Accounting’;- shared incentives • Value for Money- cost, quality and performance • Tenant and Staff discount schemes • Engaged new technology and Market Leader- National Company • Ability to benchmark nationally • Operational and Core Group Meetings • Annual Scrutiny Reviews

  19. Endorsements/ Critiques • Audit Commission Inspection (Sept 2007):- “There has been a robust approach to the re-procurement of stores operation” “Procurement of an OJEU contract on a full partnering basis is ongoing and processes to develop this have been strong and involved tenants” • Trowers Hamlins Solicitors “ This is an innovative and forward thinking approach to the tendering of materials management” “ The tender documents are organised in order that, on selection of the Service Provider, all of the information will form part of the contract , it focuses on quality and innovation, open –book pricing and incentivisation”

  20. Opportunity for Questions and Answers