The document outlines the transformation of procurement and supply chain processes at the National Nuclear Laboratory (NNL) to deliver more value. Historically, NNL procurement was tactical and reactive, but it has shifted to a more strategic function. Key successes from 2005-2009 include over £1 million in annual cost savings and improved supplier relationships. The 2010/11 strategy focuses on supporting NNL's growth, delivering £500k in benefits, standardizing processes, and developing procurement staff capabilities. The goal is to manage the supply chain strategically.

1. Slide 1

2. Transforming Procurement
and the Supply Chain to
Deliver Value for the National
Nuclear Laboratory
28 September 2010
Wayne Muckley
Head of Procurement, National Nuclear Laboratory Limited

3. Overview
• Introduction
• National Nuclear Laboratory - background
• Historical Procurement process
• Strategic Procurement
• Successes 2005 to 2009
• 2010/11 way forward
• Questions
Slide 3

4. National Nuclear Laboratory – Heritage and Timeline
• Pre 1996: Multi Centred Nuclear Technology
• 1996: Integrated Research and Technology
• 2003: Nuclear Sciences and Technology Services
• 2003: Acquired AEA (T) Nuclear Science Business
• 2004: Shadow Subsidiary (NSTS)
• 2005: Full Subsidiary Status (Nexia Solutions Ltd)
• 2008: National Nuclear Laboratory
• 2009: NNL Managing Contractor
Slide 4

5. SBM - NNL Managing Contractor
• Atomic Weapons Establishment
• National Physical Laboratory
• 7 National Laboratories
• 2 International Laboratories
• Dalton Nuclear Institute
Slide 5

6. Management Structure
Department of Energy and
Climate Change (DECC)
NNL Ltd Board - Chair, 2 Non-
Shareholder Executive
execs, 3 execs
Management Contract
• Management Secondees
• Reach-back
• 3yr+1yr+1yr contract
• Deliver Strategic and Business Plans
Executive Leadership Team
Slide 6

7. National Nuclear Laboratory
Governance
• Government owned Contractor operated (GoCo)
Funding
• Commercial/Customer
Operation
• Managing Contractor
Slide 7

8. National Nuclear Laboratory Vision
Our Vision for the NNL is:
To become a valued and successful
nuclear science and technology laboratory,
world renowned for its exceptional staff,
cutting edge facilities and excellent value
for money.
Slide 8

9. National Nuclear Laboratory
• International nuclear R&D centre
• Support new build and clean up
• Safeguard nuclear expertise, facilities and skills
• Deliver value for customers
• Trusted advisor
• Collaborations/Partnerships/Links
• Socio-economic focus
Slide 9

10. The Role of National Nuclear Laboratory
Slide 10

11. National Nuclear Laboratory - Facilities
• Sellafield (429 people)
– Central Laboratory (288)
– Windscale Laboratory (141)
• Workington Laboratory (51)
• Springfields
– Preston Laboratory (139)
• Risley (144)
• Stonehouse (16)
• Harwell (14)
Slide 11

12. Historical Procurement Process
Symptoms: -
• Poor relationships
• Increased sole source
Historical State • Inappropriate T’s & C’s
• Reduction in negotiation power
Procurement
Involvement
Business • Poor payment profile
Development /
• Value for money not achieved
Operations • Process / project delays
• Increase existing barriers to entry
Time • Reactive, transactional Procurement
• Procurement becomes last option
problem solver
Slide 12

13. Example / Impact of Bad Practice
Examples: - Impact: -
No contract management Potential late deliveries
Advance payments Retention of Title
Informal discussions Invalidation of Contract
Sole source justification Supplier views and treats
NNL as a captive customer
Work not competed NNL’s customers do not
get value for money
Not involved at estimating Work not competed; wrong
supplier selection;
opportunism; no T’s & C’s
unnecessary delays
Slide 13

14. What suppliers can be good at!
• Creating relationships
• Profit maximisation
• Reducing accountability
• Creating confusion and contractual ambiguity
• Opportunism
• Social capital
• Manipulating / Creating barriers to entry
• Avoiding Procurement
Slide 14

15. Three Key Strategies for Adding Value - 2005
Added Value
Customer Least Cost
Internalisation
Service Acquisition
Slide 15

16. Strategic Aspects
Purchase
Estimating / Supplier
Order Documentation
Bid Performance
Processing
Staff & Support
Slide 16

17. Estimating Process
• Must engage Procurement at estimating stage
• Notification to be as early as possible – if you are
going to the supply chain tell us in advance
• Peer review of technical specifications
• Joint efforts in delivering best practice
• Regular reviews
• Internal learning via vendor management
Slide 17

18. Vendor Management
• Vendor management / Close out reports
• Historically, NNL was perceived as a “Soft Touch”
• Measure supplier performance
• Static data – accreditation, financial, capability
• Evolving data – supplier performance
• Contract management
• Non conformances
• Close out reports
• Organisational learning / Supplier development
Slide 18

19. Current Procurement Process
Benefits: -
• Appropriate supplier selection
Current State • Robust T’s & C’s
• Competed work
Involvement
Business
Development / • Incentivised suppliers
Operations
• Improved order processing
Procurement
• Proactive management of suppliers
• Reduction in process delays
Time • Risk reduction in supply chain
• Appropriate risk sharing
• Introduction of new suppliers
Slide 19

20. Opportunity
Project inception
(22%)
Savings
Supplier contact
(18%)
Savings
Supplier selection
(10%)
Checking the
Savings
contract
(2%)
10% 25% 50% 75% 100%
Degree of involvement in goods and services
Slide 20

21. Successes – 2005 to 2009
• Cost savings in excess of £1m per annum consistently
achieved since 2005/06
• Procurement seen as a strength in 2007 & 2008 Management
Reviews
• Process now focuses on strategic aspects
• Team strengthened – internally / externally
• Supplier opportunities – NNL website
• Customer surveys 2005 & 2008 – improvements
• Executive sponsorship 2009 – reduce transactions, category
management, operational efficiency, CI event
• Team size reduced by 25% in 2009, move Procurement up
the value chain
Slide 21

22. Reduce Transactional Activity
2008/09
Threshold No of PO % of all Value PO % of
Lines PO Lines Lines Overall
Value
< £500 8,733 75% £813k 2.4%
< £1k 9,535 81% £1.4m 3.9%
< £5k 10,714 92% £4.1m 11.9%
2009/10
Threshold No of PO % of all Value PO % of
Lines PO Lines Lines Overall
Value
< £500 6,241 69% £619k 1.6%
< £1k 6,989 77% £1.1m 3.0%
< £5k 8,147 90% £3.7m 9.7%
Slide 22

23. 2010/11 Procurement Strategy
Strategic Objective Procurement Objective
Strategic – support growth
Sound commercial footing
Deliver agreed benefit target
Continuous improvement (CI)
Operational efficiency Standardise procurement
processes & tools
Develop capabilities &
Maintaining skills
performance
Slide 23

24. Strategic – support growth
Critical Success Factor
• Procurement delivers sub-contract solutions which
contributes to NNL’s EBIT and turnover
Understand functional plans
Understand facility cost base
Involvement in key bids & NNL strategy
Reduce fixed price / incentivisation sub-contract
costs
Slide 24

25. Deliver agreed NNL benefit target
Critical Success Factor
• Deliver £500k Towards NNL 2010/11 EBIT target
Agree benefit target with ELT
Track benefits through NNL Procurement Plan
Prioritise to focus on EBIT
Category management – NNL specific, NDA Shared
Services, Serco reach-back
Slide 25

26. Continuous improvement
Critical Success Factor
• Deliver efficiency improvements in procurement
processes
Review and implement CI recommendations
Further deployment of onecards
Implement e-catalogue links from Agresso
Supplier reduction through education and challenging
the business
Slide 26

27. Supply Chain Management
STRATEGIC STRATEGIC
SUPPLY CRITICAL
Bottleneck Strategic
Risk
and/or
Exposure TACTICAL TACTICAL
ACQUISITION PROFIT
Routine Leverage
Automate /
simplify
% of Total expenditure
Slide 27

28. Standardise procurement processes & tools
Critical Success Factor
• NNL Procurement has standard processes & tools
Contract Supplier
Supplier Sourcing Contracting with
implementation & performance
& Negotiation selected supplier
P2P management
Review and implement CI recommendations
E-tendering & evaluation introduced
More effective supplier relationship management
Improved intranet page
Approved suppliers list
Slide 28

29. Develop capabilities and performance
Critical Success Factor
• Procurement team deliver against stretching
personal performance objectives
Set objectives in line with NNL Business Plan
Use new NNL performance management process
Review skill levels and what needs to be done to
close skills gap
Continue regular 1:1s
Slide 29

30. Summary - From Tactical to Strategic
1 Infant Fragmented
2005
2 Awakening Realisation of savings potential
3 Developing Control & development of price / negotiation 2009
4 Mature Specialist buyers, cost reductions, supply base 2010
management
5 Advanced Supply chain management, relationship Target
management, leverage buying
Slide 30

31. Summary
• Clearer understanding of National Nuclear
Laboratory
• Three clear strategies for adding value in 2005
• Focus on strategic aspects of Procurement
• Procurement – enabling competence
• Successes: -
• Move Procurement up value chain
• Reduce transaction activity
• Procurement Strategy 2010/11
Slide 31

32. Questions?
Slide 32