Three ways suppliers can help utility firms to be more efficient

With regulators putting pressure on the utilities sector to hit efficiency targets, Industry Sector Manager Chris Cruise explains why effective indirect procurement is vital 

Utilities regulators are looking to the future – and they have high expectations for companies operating in the sector. Water regulator Ofwat, for instance, has recently ordered that water and wastewater companies return £114 million to customers because of underperformance. It also has new powers to impose fines of up to 10% of turnover on companies providing poor customer service and will be forensically scrutinising company plans with customers, the environment and affordability in mind. 

Indirect procurement spend is one area that utility companies can look at to drive efficiency and savings in response to such demands. They can also look to suppliers for ways to drive efficiency and support them with increasing the lifespan of their equipment through maintenance. 

From the work I do with the utilities sector, I believe there are three key ways in which a supplier of MRO (maintenance, repair and operations) equipment can make a tangible difference. 

1) Provide the right equipment
The key to extending the life of assets in the utilities sector is effective maintenance, which requires a wide variety of parts, equipment and tools. The most cost-effective method of MRO procurement relies on keeping supplier numbers as low possible, so it’s crucial the chosen suppliers have as wide a range of products as possible. 

At RS, our utilities team has an in-depth knowledge of the sector and a huge product range (in excess of 750,000 products), which helps us to provide customers with virtually everything they need. 

2) Review stock holdings
One of the advantages of using a small number of key trusted suppliers is that you can work closely with them to identify inefficiencies. Many providers are moving to a highly focused, planned approach to maintenance, which involves bringing a larger number of parts and tools into their business. 

Let’s look at an example in the water industry. My team works with a number of major water suppliers, stock profiling to see what they have, what they need and what they don’t need. By having the correct equipment in-house, it’s possible to ensure any maintenance is carried out in a timely and effective manner. For unplanned or reactive maintenance, customers can make use of RS’s 24-hour delivery for parts they don’t hold on site.  

3) Rationalise products
Wherever possible, utility companies should work with their suppliers to review and rationalise the products they use. It’s not unknown for several engineers working across various sites to have a number of different brands of power drill or spanner sets, which are at different price points but do exactly the same job. 

By rationalising these with your supplier, you can agree a set of products required and allow these to be ordered as and when needed, also putting controls on the products that can be purchased by the end users. It may not seem significant, but by going through this process across your entire indirect procurement spend there are significant savings to be made, which can be passed on to customers or reinvested in infrastructure. 

The challenges and opportunities for managing the indirect category of supplies for MRO, are explored in depth in our annual research with the Chartered Institute of Procurement and Supply (CIPS). For the latest report, click here.

For MRO procurement insight, click here