Supply Chain Partnerships

1. Supply Chain Partnerships A Presentation for Sellafield World Quality Day Presented by Martin McKay NDA Quality Manager v1

2. What we will Cover • An Introduction to the NDA • The Quality Principle • What Are Supply Chain Partnerships • Why Do It – Advantages & Disadvantages • Quality Implications • Case Studies • NDA Supply Chain Work • Conclusions • Q & A

3. NDA - Who We Are • We are a non-departmental public body, established under the Energy Act 2004. We are responsible for the decommissioning and clean-up of the UK's civil public sector nuclear sites. • Our sponsoring Government department is the Department for Energy & Climate Change, which approves our strategy, plans and budget. • We also report to the Scottish Ministers who agree our strategy and plans for Scottish sites.

4. NDA – Our Mission • Our mission is to deliver safe, sustainable and publicly acceptable solutions to the challenge of nuclear clean-up and waste management. • This means never compromising on safety, or security, taking full account of our social and environmental responsibilities, always seeking value for money for the tax payer, and actively engaging with stakeholders.

5. NDA Strategic Priorities • Encourage the highest standards in safety, security and environmental management; • Drive hazard reduction; • Secure our funding framework; • Gain the support and confidence of our stakeholders; • Achieve more for less; • Develop integrated waste solutions; • Maximise commercial value; • Build an effective industry; • Create a world class organisation.

6. NDA – General Information • Established by Government in April 2005 to: • Safely clean up the UK civil public sector nuclear legacy with due regard to the environment and socio-economic issues. • Ensure that current commercial operations are run safely and efficiently on behalf of UK taxpayer. • A National body based in West Cumbria • Accountable to Government for delivery across 19 UK sites • Strategic not operational • Clearly defined legal duties and remit • No formal role in nuclear new build

7. Sellafield Ltd • Sellafield • Windscale • Calder Hall • Capenhurst • PBO: NMP Ltd Dounreay Site Restoration Ltd (DSRL) PBO: UKAEA Ltd Low Level Waste Repository Ltd (LLWR) PBO: UKNWM Ltd Springfields Ltd PBO: Westinghouse • Magnox North Ltd • Hunterston • Chapelcross • Wylfa • Trawsfynydd • Oldbury • PBO: RSMC Ltd • Magnox South Ltd • Sizewell A • Bradwell • Berkeley • Dungeness A • Hinkley A • PBO: RSMC Ltd • Reactor Sites Restoration Ltd (RSRL) • Winfrith - Harwell • PBO: UKAEA Ltd The Site Licence Companies (SLCs) • Calder Hall

8. Dividends PBO Contract People Shares Competition Fee Revised M&O Contract SLC M&O Contract Continuity Subcontracts Competition REGULATORS NDA Contract Model

9. NDA Supply Chain spend Approx £1.3bn was spent in the Supply Chain in 2008/09

10. The Quality Principle Supply Chain Partnerships have been linked to quality for a long time as identified within the Quality principles Principle 8 - Mutually Beneficial Supplier Relationships An organization and its suppliers are interdependent, and a mutually beneficial relationship enhances the ability to create value for both parties.

11. The Quality Principle Key benefits: • Increased ability to create value for both parties. • Flexibility and speed of joint responses to changing market or customer needs and expectations. • Optimization of costs and resources. Applying the principles of mutually beneficial supplier relationships typically leads to: • Establishing relationships that balance short-term gains with long-term considerations. • Pooling of expertise and resources with partners. • Identifying and selecting key suppliers. • Clear and open communication. • Sharing information and future plans. • Establishing joint development and improvement activities. • Inspiring, encouraging and recognizing improvements and achievements by suppliers. Source International Standards Organisation (ISO)

12. What Are Supply Chain Partnerships Two or more organisations working collaboratively can leverage significant advantages in terms of efficiency, profitability and the creation of added-value solutions. The definition used within the NDA is A supply chain partnership can be defined as an approach with an attitude or management ethos , (towards selected suppliers) of openness, effective communication, close collaboration and co-operation, trust, honesty, transparency, sharing and mutual benefit (attributed to Chartered Institute of Purchasing & Supply)

13. What Are Supply Chain Partnerships Today it is supply chain competing against supply chain, not individual firm against firm in business world today. So it makes sense for firms to collaborate so as to maximise the ‘strength’ of the supply chain. There are four basic ways to assure business function completion • Internal activities: vertical integration • Perform activities in-house using internal resources & expertise • This requires large & capable organisations • Acquisitions: • Acquire another organisation that has the expertise & resources in other areas • Arm’s-length transactions: • For many times, this is the most effective arrangement as specialised organisations (suppliers) have economies of scale • Strategic alliances: • Multifaceted, goal-oriented, long-term partnership between companies

14. What Are Supply Chain Partnerships • The two types of partnership: • Vertical partnerships: spanning different businesses in a common supply chain • E.g.. partnership between suppliers & retailers, manufacturers etc. • Streamlining existing capabilities • Horizontal partnerships: spanning different supply chains • E.g.. partnership between shipping companies, airlines, 3PLs, etc. • Creating new strategic capabilities, access to new markets, new products and services, and the like

15. Inside system Inter-organizational Inter-personal trust Almost none Vertical integration Joint venture Strategic alliance Partnership Arm’s-length What Are Supply Chain Partnerships Relationship styles continuum

16. What Are Supply Chain Partnerships The characteristics of partnerships • Sharing of information • Trust and openness • Coordination and planning • Mutual benefits and sharing of risks • A recognition of mutual interdependence • Shared goals • Compatibility of corporate philosophies

17. What Are Supply Chain Partnerships Characteristics of partnership types

18. Why Do It – Advantages & Disadvantages Economic justification for partnerships • Inter-firm relation-specific assets • Duration of safeguards • Volume of inter-firm transactions • Knowledge-sharing routines • Partner-specific absorptive capacity • Incentives to encourage transparency and discourage free riding • Complementary resources and capabilities • Effective governance • Employ informal governance mechanisms

19. Why Do It – Advantages & Disadvantages • Advantages of partnerships • Save cost of negotiations • Reduce monitoring of supplier soundness • Increase productivity • Disadvantages of partnerships • Inability to price accurately qualitative matters such as design work • Need for organizations to gather substantial information about potential partners on which to base decisions • Risk of divulging sensitive information to competitors • Potential opportunism by suppliers

20. Why Do It – Advantages & Disadvantages The Benefits of Supply Chain Partnership • Adding value to products • Improving market access • Adding technological strength • Enhancing strategic growth • Enhancing organisationalskills • Building financial strength The Strategic Forum for Construction evidences the results of the integration as: • Delivery that is between 25 and 40 per cent faster than competitors and requires 11 to 30 per cent less capital • Enhanced profitability, reduced operating costs and more sustainable outcomes • Significantly improved predictability of programme, price and quality • Working in a safer environment where empowered people are open, honest, realistic and go home feeling trusted, valued and fulfilled.

21. Why Do It – Advantages & Disadvantages Benefits by Category

22. Why Do It – Advantages & Disadvantages Benefits by Category

23. Quality Implications Aside from the benefits mentioned previously, the specific benefits from a Quality perspective include: • Greater buy in to quality • Knowledge sharing between organisations • greater awareness of intangible customer needs due to the closer working relationship - this is powerful market intelligence that their competitors may well not have access to • accelerated reduction in non-conformance costs by faster linking of the effect (found at the customer) and the cause (in their own business) • continual pressure regarding the need to do things better - a given in today's economic climate but something we all need constant reminding of • greater mutual understanding by both parties regarding each others isues/concerns • reduction in defects and associated costs for both parties • accelerated opportunities for performance improvement

24. Case Study - @one Alliance In 2005 Anglian Water formed the @one alliance to deliver its AMP4 programme (Asset Management Plan 4). The alliance was formed of contractors and consultants in the water industry, all selected for there skills and performance but also importantly their previous partnering performance. The alliance will operate from 2005 to 2010. All parties involved provided resources dedicated to the alliance, to bring about an effective delivery team to develop and deliver solutions to the £1.4Bn programme of upgrades and improvements to the Anglian Water Infrastructure

25. Case Study - @one Alliance The Alliance itself was set up to deliver more for less to ensure that there was a genuine joined up approach to delivery of AMP4 and to ensure that all aspects of delivery considered safety, environment, sustainability, quality and efficiency. The alliance also set up an integrated procurement team including staff from all the participants, the role of this team was to reduce the procurement costs of AMP 4 by up to 5% of a £750m spend. The collaborative procurement was not just economies of scale but also smart procurement, each partner looking at all aspects of the spend and also developing a procurement plan for AMP 4.

26. Case Study - @one Alliance The integrated procurement team established partnerships with all parts of the supply chain from aggregates to plant hire to process plant, sharing the forward procurement plan with the suppliers. The efficiencies were not all based on lower costs of materials but also on ensuring delivery to programme, better quality, and innovative solutions, as well as offering whole programme supply as opposed to the previous arrangements where by each project was procured separately. (At this time all other water companies were running AMP4 programmes)

27. Case Study - @one Alliance To date the results of the integrated procurement and alliance approach has delivered significant savings and efficiencies to the Anglian water AMP 4 programme, exceed initial expectations. Anglian Water has recently released its tender for the AMP 5 programme of £2.5bn of work from 2010 to 2015, but may extend the contracts of those working on AMP4 as the performance of AMP4 has been excellent. The AMP5 programme will use the same approach whoever is appointed to the alliance.

28. Case Study – DWP Jobcentre Plus rollout • DWP's Jobcentre Plus project, launched in October 2002, is one of the largest government construction programmes undertaken in the UK, in recent years. • The aim of this ambitious £750 million programme was to redesign, rebrand and refurbish approximately 1,000 former Jobcentre and Social Security offices in Great Britain and make the job-seeking and benefit claiming experience less sterile and more like that encountered in the banking and retail sector.

29. Case Study – DWP Jobcentre Plus rollout

30. Case Study – DWP Jobcentre Plus rollout The Approach taken • DWP attempted a rare approach in rolling out an integrated supply chain for the Jobcentre Plus programme. • An open book culture, with a collaborative attitude, has made the project environment seamless. • Staff training and the use of project tools, such as value engineering, were encouraged to maximise value gains. • The emphasis on 'One-Team', introduced at the start, focused on equal sharing and partnering, with incentives based on project performance. • This culture was embedded, from management through operation and into delivery. • It was recognised that a problem will only become an issue if a team is disjointed. • By working collaboratively, with like-minded people in a team environment, DWP has created a trusting and sharing culture, which has contributed to the success of this project.

31. Case Study – DWP Jobcentre Plus rollout Achievements and benefits • DWP placed an emphasis on adopting an open, non-hierarchical culture throughout the supply chain. • The project has received two awards - the Government Opportunities 2004 Award for Public Procurement Excellence and the Building 2005 Integrated Supply Chain of the Year award. • The supply chain has fostered a spirit of partnership, which has contributed to the project meeting extremely demanding ministerial targets. • Cost predictability has been maintained and seven per cent has been saved on construction costs, against target cost, with 25 per cent (average) saved on commodity items. • DWP has formulated new ways of working, to create an integrated team approach, going further than a statement of intent. This resulted in improved health and safety standards, behavioural practice and accident statistics. • Considerable emphasis was placed on selecting the right skills and attitude in the supply chain, combined with the right price. Increased speed to market, innovation and improved quality of product, sustainable sourcing with surety of delivery and coordinated logistics. • The delivery team placed focus on better understanding of project issues. Resulting in appropriate product selection, improved supplier input into design parameters and more lessons learned. These significant achievements are underpinned by closer partnership. Companies and disciplines have united to achieve tangible and significant progress through highly successful and innovative liaisons.

32. Case Study – DWP Jobcentre Plus rollout Lessons learnt • Both the private and public sectors can work with and learn from each other, to improve delivery and reduce costs. The supply chain has fostered a spirit of partnership, which has helped the project to meet Governmental targets. • The procurement strategy and initiatives, introduced by DWP, are viewed as a model of success in team working and delivering best value. Many of the companies in the supply chain have adopted the processes and procedures employed on the Jobcentre Plus project. • Collaboration can and does work, but a great deal of hard work is required before the benefits are realised. Rushing the start of a project, and not having sufficient time to prepare the supply chain, results in errors, delays and additional cost. In selecting companies, a willingness and capability to operate in a collaborative manner is crucial. Companies will cooperate when they are given clear guidance and incentive.

33. NDA Supply Chain Work The NDA Supply Chain Charter has recently been released and is available for consultation via the NDA website WWW.NDA.GOV.UK The NDA Supply Chain development Charter was released in May 2009, Available on the NDA website

34. Source -NDA Supply Chain Strategy

35. Conclusions

36. References • Chartered institute of Purchasing & Supply • Anglian Water • Strategic Forum for Construction • Envirowise • DWP • OGC • NDA

37. Questions & Answers Any Questions