Our client, one of the largest UK general insurers; they asked us to tackle their sizeable facilities and property management category which supported a large branch and regional head office network.
Our client had a large and long-standing supply chain, which had been tactically assembled over a number of years. It was felt that the individual arrangements were competitively priced, yet the total acquisition cost and administrative burden for such a large supply chain represented poor value overall. Our client commissioned us to assess whether alternative delivery methods were viable, and in doing so identify areas for potential consolidation to as great an extent as a single ‘total facilities management’ approach. Crucially, any new proposed strategy would need to demonstrate a net-zero or improved position on operating costs.
A key motivation for commissioning this review was the sheer scale of costs, both direct and indirect, associated with this category. Over the years the client’s revenue had come under increasing pressure due to changes in the consumers buying behaviour and new market entrants and as such, it had begun an ambitious cost-down programme.
Our client was being serviced by over 30 incumbent providers for services which included office cleaning, window cleaning, waste management, pest control, hygiene services and property maintenance. Performance of these suppliers varied greatly, and contractual and service obligations were dramatically vague. As a consequence, the management and operational resource required to manage this supply chain was highly disproportionate and did not represent value. A comprehensive category review was required to conclude with a market leading facilities management company or companies being appointed that could take the client forward in terms of addressing the key challenges identified.
With these challenges in mind, our client approached the review in a very open-minded fashion. No boundaries or constraints were placed around our sourcing process, so we were able to explore opportunities within the marketplace to its full extent. Their overriding objective was to ensure that their facilities management supply chain strategy was market-tested, was strategically aligned to their wider business and that the strongest suppliers were engaged.
- Disproportionately high operating costs
- Disaggregated supply chain and misalignment to corporate strategy
- Supplier under performance
Key to the development of the category strategy was bringing together the thoughts of the client, our thoughts and the wider experience of suppliers from the facilities management supply chain. Considering the client wanted to adopt their final strategy based upon evidence from the marketplace this was a key step ahead of the tender process. With this in mind, we facilitated several meetings to develop a conceptual way of thinking with the emphasis on what the strategic options are with the associated benefits and risks.
Once we had a clear understanding of the strategic options available and the benefits/risks of each, from a number of perspectives in conjunction with a clear understanding of the current service, we agreed with the client a high-level strategy which would transition them from working with 30 incumbent suppliers for the range of services, across all locations, to working with a single supplier.
- Challenge the current way of thinking
- Meet with market leading suppliers
- Explore alternative strategies pre-tender
- Evaluate the risk/benefits of each strategy then tender the selected option
Our approach to this key project took the form of a two-stage sourcing strategy.
Firstly, a conceptual review, engaging a range of market-leading providers, to understand and give consideration to a range of potential supply chain structures. Ranging from ‘managed agent’ supply chains, regional preferred suppliers, through to the total consolidation into a single provider. We used our experience to help guide our client through this assessment to help them form and commit to a final to-be supply chain structure. In this case, a move to a single consolidated provider.
The second stage was to execute our sourcing strategy. We deploy our market-leading sourcing methodology to scope and execute a comprehensive tender process, form contract and support the wider implementation and transition, including the TUPE transfer of client staff.
This award to a market-leading provider saw our client commit to this strategy with a 3-year contract; consolidation, simplification of service management and the delivery of an enhanced service through technology and pro-active account management became the focus.
Our client saw significant operational improvements from this ‘best-in-class’ provider and the relationship became strategic, with appropriate levels of internal seniority and strategic consideration applied to it. Rather than a tactical and distress/event led approach. In our client’s eyes, this changed the management of this category from ‘an industry in itself’ to ‘managing by exception’.
In addition to service improvements, we achieved a substantial reduction in our clients operating costs, to the tune of 26%. Keener service and trade pricing, a more consolidated approach to job management, and improved ‘first-time fixes’ reducing overall expenditure.
- Award a 3-year contract to a leading facilities management provider
- Partnered with a provider who could consolidate spend
- Operational service improvements delivered
- Significant cost saving of 26%
- Potential to evolve specifications to make further savings
As we discussed above, we were encouraged by the openness of the client to leave nothing unchallenged. An approach we would always encourage our clients to take.
We achieved significant operational and operating cost benefits for our client. However, as with any contract, the final piece of the jigsaw is to ensure a robust contract and a meticulous approach to implementation.
Using our deep levels of experience in this category, and our own bank of precedent agreements, we implemented a thoroughly drafted and practicable supply contract between our client and their chosen party, with minimal impact on our client’s internal legal counsel.
Furthermore, we provided oversight and support to our clients Project Management team, sharing our knowledge and experience with them to ensure a seamless transition.
This project was a great success for our client. We achieved, and bettered, their original ambitions for this category, whilst also creating a platform for our client to continually improve the management and condition of their property estate.
- Sustainable and significant cost savings
- Platform for continuous improvement
- Consolidation and technology advancement
- Improved supplier management processes
- Internal process savings