0
Slide 1
Transforming Procurement
and the Supply Chain to
Deliver Value for the National
Nuclear Laboratory

28 September 2010
Wayn...
Overview

• Introduction
• National Nuclear Laboratory - background
• Historical Procurement process
• Strategic Procureme...
National Nuclear Laboratory – Heritage and Timeline


• Pre 1996: Multi Centred Nuclear Technology
• 1996: Integrated Rese...
SBM - NNL Managing Contractor

                • Atomic Weapons Establishment
                  • National Physical Labora...
Management Structure
 Department of Energy and
  Climate Change (DECC)

                                NNL Ltd Board - Ch...
National Nuclear Laboratory

Governance
• Government owned Contractor operated (GoCo)

Funding
• Commercial/Customer

Oper...
National Nuclear Laboratory Vision


           Our Vision for the NNL is:


    To become a valued and successful
nuclear...
National Nuclear Laboratory

• International nuclear R&D centre
• Support new build and clean up
• Safeguard nuclear exper...
The Role of National Nuclear Laboratory




                                     Slide 10
National Nuclear Laboratory - Facilities

                     • Sellafield (429 people)
                        – Central...
Historical Procurement Process
                                                   Symptoms: -
                            ...
Example / Impact of Bad Practice

Examples: -                  Impact: -


No contract management       Potential late del...
What suppliers can be good at!

• Creating relationships
• Profit maximisation
• Reducing accountability
• Creating confus...
Three Key Strategies for Adding Value - 2005




                   Added Value




   Customer         Least Cost
       ...
Strategic Aspects



                Purchase
Estimating /                                    Supplier
                 Or...
Estimating Process

• Must engage Procurement at estimating stage
• Notification to be as early as possible – if you are
 ...
Vendor Management

• Vendor management / Close out reports
• Historically, NNL was perceived as a “Soft Touch”
• Measure s...
Current Procurement Process

                                     Benefits: -
                                     • Appro...
Opportunity

Project inception
(22%)

                                                    Savings
Supplier contact
(18%)

...
Successes – 2005 to 2009

• Cost savings in excess of £1m per annum consistently
  achieved since 2005/06
• Procurement se...
Reduce Transactional Activity
2008/09
Threshold    No of PO   % of all   Value PO     % of
              Lines     PO Line...
2010/11 Procurement Strategy

  Strategic Objective       Procurement Objective


                            Strategic – ...
Strategic – support growth

Critical Success Factor
• Procurement delivers sub-contract solutions which
  contributes to N...
Deliver agreed NNL benefit target

Critical Success Factor
• Deliver £500k Towards NNL 2010/11 EBIT target


Agree benefit...
Continuous improvement

Critical Success Factor
• Deliver efficiency improvements in procurement
  processes


Review and ...
Supply Chain Management

               STRATEGIC        STRATEGIC
                 SUPPLY          CRITICAL
             ...
Standardise procurement processes & tools

Critical Success Factor
• NNL Procurement has standard processes & tools
      ...
Develop capabilities and performance

Critical Success Factor
• Procurement team deliver against stretching
  personal per...
Summary - From Tactical to Strategic


1 Infant       Fragmented
                                                         ...
Summary

• Clearer understanding of National Nuclear
  Laboratory
• Three clear strategies for adding value in 2005
• Focu...
Questions?




             Slide 32
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Transforming Procurement & the Supply Chain to Deliver Value for the National Nuclear Laboratory

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eWorld Purchasing & Supply Conference
Day 2 - September 29th, 2010

14:45 to 15:15 PM Transforming Procurement & the Supply Chain to Deliver Value for the National Nuclear Laboratory

Overview:
Learn about the development of the Procurement capability at the National Nuclear Laboratory since the formation of the company in 2005. The strategy has been based on internalisation of the function, least total cost of acquisition and improving levels of customer service. During this time procurement has been embedded across the business and supply chain performance has been transformed. The team has also been strengthened with over half now holding full membership of CIPS. In addition this will provide a unique insight to the future strategy of moving the role of procurement and the supply chain to a more strategic level.

Speaker:

Wayne Muckley, Head of Procurement, National Nuclear Laboratory

Published in: Business, Technology
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Transcript of "Transforming Procurement & the Supply Chain to Deliver Value for the National Nuclear Laboratory"

  1. 1. Slide 1
  2. 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. 3. Overview • Introduction • National Nuclear Laboratory - background • Historical Procurement process • Strategic Procurement • Successes 2005 to 2009 • 2010/11 way forward • Questions Slide 3
  4. 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. 5. SBM - NNL Managing Contractor • Atomic Weapons Establishment • National Physical Laboratory • 7 National Laboratories • 2 International Laboratories • Dalton Nuclear Institute Slide 5
  6. 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. 7. National Nuclear Laboratory Governance • Government owned Contractor operated (GoCo) Funding • Commercial/Customer Operation • Managing Contractor Slide 7
  8. 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. 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. 10. The Role of National Nuclear Laboratory Slide 10
  11. 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. 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. 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. 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. 15. Three Key Strategies for Adding Value - 2005 Added Value Customer Least Cost Internalisation Service Acquisition Slide 15
  16. 16. Strategic Aspects Purchase Estimating / Supplier Order Documentation Bid Performance Processing Staff & Support Slide 16
  17. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 32. Questions? Slide 32
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