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Materials Management ‘Stores Outsourcing’ Tuesday 27 th January 2009 Shaun Aldis Director of Property Services Repair

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Materials Management ‘Stores Outsourcing’ Tuesday 27 th January 2009 Shaun Aldis Director of Property Services Repair and Maintenance in the 21st Century. Historical Context. Wolverhampton Homes:- A.L.M.O. established in October 2005.

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Presentation Transcript
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Materials Management

‘Stores Outsourcing’

Tuesday 27th January 2009

Shaun Aldis

Director of Property Services

Repair and Maintenance in the 21st Century

historical context
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
the scope of the review the scope looked at
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
background introduction position statement
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
procurement model and options
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)

option 1 retain current service
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
option 2 single strategic supply partner i
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
option 2 single strategic supply partner ii
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
option 3 office of government commerce
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
option 4 procurement for housing i
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.
option 4 procurement for housing ii
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.
partnership contract details
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
evaluation model
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%)
challenges
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
efficiencies
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
outputs i
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
outputs ii
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
the future
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
endorsements critiques
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”

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Opportunity for

Questions and Answers

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