With the start of CP6 in April edging ever closer, Network Rail has started to spend some of its allocated billions. Putting the challenges of CP5 behind them, suppliers will be hoping the next control period will deliver on its promises and give them the confidence they have been longing for to invest in their businesses.
Fostering better relationships with its suppliers is one of Network Rail’s key aims for CP6. “I certainly think some progress has been made,” said Rob Morton, Network Rail Route Services’ supply chain director. “Certainly from the conversations with them, we are not yet easy enough to do business with; that’s pretty obvious.”
Supply Chain Operations (SCO) oversees the procurement of materials and services across Network Rail’s Route Services business.
“It’s one of the bigger parts of Network Rail but probably one of if not the most invisible, which in many ways is a good thing because we should be invisible,” said Rob, who has been challenged with applying the same high-performing principles from the retail and manufacturing sectors to rail.
Shift in attitude
SCO’s strategy focuses on investing in facilities, mobilising for devolution and revisiting Network Rail’s relationship with its major suppliers.
“The first thing really is a shift in attitude – a shift of what’s acceptable,” said Rob, who joined Network Rail from energy company Centrica, where he was the managing director of its supply chain and procurement business.
During CP6, Network Rail believes it can save more than £150 million by modernising its supply chain operations.
A number of practical steps have already been taken, including moving strategic rail fleet spares from unsuitable storage areas to a central purpose built facility. But, according to Rob, the biggest savings will come from revisiting contracts with some of the organisation’s main suppliers.
“It’s a classic case of if you do the same thing, with a similar supply base, in the same way you’ve always done it then you’re kind of going to have to expect a similar answer,” said Rob, who explained how he and his team have been talking to suppliers to better understand their commercial objectives.
“So working with them – and understanding them in a much more mature way – we’ve been able to approach the market and say ‘rather than just give us your best price for this tonnage, what is it you want to achieve out of this relationship?’ How can we get much more of a commercially creative outcome?”
As well as revising its policies and contract terms, Network Rail is making a substantial investment in areas where it felt it is currently underperforming against industry best practice.
Rob said it was noticeable while visiting sites around the country that Network Rail’s depot facilities were lagging behind others in the sector. To tackle this, Network Rail is upgrading its depots and is building new maintenance hubs in York and Reading.
“We’ve got a very significant investment programme now happening in the depots to bring them all up to the standard that they need to be at to achieve a situation where there are no excuses for not doing a perfect job,” said Rob.
During the next control period, Network Rail’s eight separate devolved route businesses will have much more freedom to decide what they buy and who they buy it from. Some things will continue to be procured by SCO and offered to the routes, but they will be free to use another provider if they can get a better deal.
While there is the risk that devolution could result in higher prices from suppliers, Rob believes that by embracing the new route structure they will be able to do more to support local supply chains without significantly diluting their buying power.
However, he admitted that suppliers would be waiting a few more months to find out exactly what devolution would mean for them.
Rob said: “I think it’ll be easier for suppliers when we get into quarter one [of 2019], and we as an organisation have been able to publicise how we’re going to operate devolution and what that means for the organisation, what it means for suppliers.”
Boom and bust
While Rob believes there’s only so much they can do to end the boom-and-bust funding of the railway, there are a number of changes which he believes will make a difference.
While Network Rail has been able to defer a number of projects from the current control period into CP6, it will be limited in its ability to move funding from one year to another during the next control period.
The lengths of contracts will also change, with some of the traditional five-year framework contracts switching to longer deals. There will also be more commercial incentives for companies to deliver innovation.
Rob said: “This habitual five-year cycle that seems to strangle the whole industry, we can break free of that and allow the supply base the freedom to fund investments and to fund capital purchases in such a way that’s easier for them to do. And obviously we get that reflected back in our prices and the services that we have.”
The SCO strategy is aiming to achieve what is known in the supply chain world as double 9s, or 99 per cent availability. Expressed another way, it would mean experiencing no more than 3.65 days of downtime per year due to poor reliability or availability of resources.
Although common across many other sectors, it would be new ground for the rail industry, said Rob.
But despite some initial skepticism, several services are now achieving this higher level of availability and others are showing signs of improvement. “We’re enjoying proving the doubters wrong,” said Rob.
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