Laying Firm Commercial Foundations – a case study

Housing providers spend millions every year with external organisations to maintain their assets, support their clients and achieve their strategic objectives.  Maximising the benefits from this investment is critical to the overall success of the organisation and has a lasting impact on the well-being of the tenants and the community. Achieving these benefits requires clear governance, strong leadership and appropriate skills and experiences. In this case study Paul White from MCP2 Ltd explains how MCP2 helped a housing association to deliver a high performing procurement operation by laying the firm foundations which embeds commercial thinking within the procurement function and business operations supporting the delivery of ongoing and sustainable improvements.

Background

Whilst supporting a Housing Sector Client with a Change Programme to drive benefits from the implementation of a new ERP system, MCP2 identified numerous opportunities to drive increased savings, ensure compliance with EU processes and deliver more sustainable benefits through a co-ordinated, cross-organisational approach to procurement.

MCP2 were invited to develop and deliver a Commercial Improvement Plan. MCP2 engaged a wide range of stakeholders, including senior leaders, to provide a robust business case. The objective was to:

  • Make a step change in procurement’s capability
  • Deliver excellent service to stakeholders
  • Create a sustainable operating model which delivers savings and supports the wider stakeholder community with their service stand-up plans
  • Review benefit realisation plans across procurement and supply chain functions by offering challenge on achievability, value and approach

Approach

MCP2 built on the relationships started by the engagement through the Change Programme and were welcomed by stakeholders who had not historically engaged with Procurement, to lead the organisation co-ordinating a range of prioritised cost reduction activities into a Commercial Improvement Plan.  Activities included:

  • A risk review, highlighting areas of potential non-compliance
  • Undertaking a comprehensive spend analysis and cleansing data
  • A review of contracts
  • Benchmarking prices against other organisations
  • Developing a prioritised workplan ratified by stakeholders
  • Developing an inventory strategy
  • Developing a new Category led operating model

One of our first objectives was to understand the priorities from the board and embed the DNA of the client into the way the procurement team operated. It quickly became apparent that there was a wealth of unlocked talent and experience in the team with some very capable individuals, but no common direction or culture of working as a team.  The team was restructured with the provision of ‘category leads’ for each primary area of the business and a specialist role to provide the glue across the team in terms of development of commercial skills, governance and risk management. Each category lead had a clear understanding of their key stakeholders and specific portfolio of projects on the forward plan and this combined with regular communication, clear priorities and targets and a culture of celebrating success started to raise morale across the team.

Opportunities were taken to lead procurement projects using innovative tools such as MCP2’s ROADc methodology to review the routes to market, making recommendations and working with stakeholders as well as engaging directly with the suppliers prior to going to market.

In addition to the above approach a comprehensive framework of guidance, templates and revised processes were implemented covering both procurement and contract management.

Having embraced the new ways of working, one of the biggest challenges was giving the internal team the confidence to deliver without external support. MCP2 was able to achieve this through mentoring, improving trust and developing a team approach.

Results

The engagement of MCP2 helped to deliver a number of significant benefits for the client, including:

  • Revised plan to achieve cumulative net budget reduction of £8.8m within 3 years (Versus the current prediction of gross £4.6m over 7 years)
  • Establish a resilient strong core of procurement professionals supporting a Cross Functional Virtual Procurement Team (embedded in the business units) to enable and sustain a commercial culture change programme
  • Increased pull for early procurement service involvement in projects. 
  • Protect the organisation through the establishment of an appropriate commercial governance model
  • A robust category management regime enabling a commercial approach to existing and future pipeline
  • Implementation of ‘Whole Life’ approach (private sector by head public sector by heart) approach to commercial operations
  • Establishment of an affordable, fit for purpose, viable and sustainable commercial team enabling the business that is legally compliant
  • Improved trust, engagement and team morale

Long term, the new commercial arrangements also set a strong foundation for the future relationship between the Housing Association and their most important and strategic suppliers.

Summary

The overall learning from the past year is that effective leadership is key to empowering the right people to excel as well as making sure that the firm foundations are in place so that emergencies such as COVID19 and its impact on the supply chain can be managed effectively.

Written by Paul White, Principal Consultant at MCP2 Limited