Yorkshire Water: A £25 million procurement transformation challenge

Yorkshire Water collects, treats, and supplies 1.3 billion litres of water daily to over 2.3 million customers. Facing a need to achieve significant cost and business efficiencies, Yorkshire Water turned to Efficio to help transform its Commercial Services / Procurement function.

Yorkshire Water is a water supply and treatment utility company, servicing a large portion of Yorkshire’s households and businesses. It faced a significant funding challenge from its regulator at the beginning of 2020, which required Commercial Services to deliver £25 million in savings by 2022. So, Yorkshire Water teamed up with Efficio in summer 2020 to deliver the necessary transformations.

The existing commercial services function was not well-positioned to meet this challenge alone. It had so far operated as a reactive, administrative function with a focus on Utilities Contracts Regulation (UCR) compliance, not value delivery; and there was no focus on building out a savings pipeline to ensure that impactful savings were being delivered effectively and continuously. Additionally, contract management, strategic sourcing, and commercial assurance did not exist centrally, or at all, and sourcing was bogged down by arduous non-value-added tasks and slow processes.Yorkshire Water’s commercial services function needed to transform its policies, processes, technology, and people, so that that it could achieve a permanent step-up in capability to deliver sustained value.

Results

In partnership with Efficio, the business achieved:

• Savings of £29.4 million by summer 2021, and savings of £54.1 million (over double the original target) by the target date of March 2022
• Up to 30% reduction in average strategic project completion times, thanks to the introduction of more efficient processes and technology
• Commercial Services’ deeper involvement in the wider business’ strategy decisions, and a transition to a new operating model that delivers sustained value

Approach

Together, Efficio and Yorkshire Water took the following steps to turbocharge the existing commercial services team and practices, to deliver bottom-line impact as quickly as possible:

• Consolidated all supplier purchasing data and cleansed it for greater spend visibility, identifying savings opportunities and addressing off-contract spend. This was overlaid with the internal budget information to identify overspend and potential outsource opportunities.
• Added Efficio procurement experts to the Yorkshire Water team to provide guidance on and accelerate key projects.
• Rapidly implemented new strategic sourcing processes – including a category strategy, basket analysis, and total cost of ownership analysis – whilst intensively training the existing team.
• Implemented eFlow, Efficio's proprietary technology and data platform, alongside existing technology solutions, to provide rapid turnaround of bid analyses at a more granular level. 
• Established a new savings policy and finance approvals to boost visibility on the bottom-line impact. Commercial Services and Finance worked together proactively to produce budgets reflecting savings forecasts for the first time, to ensure accountability between both departments.
• Established a PMO function within Commercial Services to manage delays, support the team, and track savings.
• Created a suite of business engagement forums to involve Commercial Services in more strategic decision-making at the C-suite level.
• The combined Commercial Services team has designed and transitioned to a new operating model that ensures sustained value delivery; Yorkshire Water leverages external expertise whilst also maintaining internal control of its procurement and supplier relationships via a leaner and upskilled team.

Challenges

Yorkshire Water had to deliver cost savings rapidly, but its commercial services function was, on balance, too reactive and administrative, rather than focused on value delivery. In place of a tendency towards simple tenders, with savings not directly targeted, there were now large, extended projects dealing with complex sourcing processes. Efficio brought in training at the beginning in order to upskill the existing team, so it could run the complex tenders. Efficio also supported conversations with the market to bring suppliers on board with Yorkshire Water’s new ways of working. 

Commercial Services and Finance co-owned targets to assure internal buy-in, with projects running a gateway process that ensured alignment throughout. However, the existing commercial team was initially hesitant of the changes in approach. Efficio and Yorkshire Water leadership encouraged a culture of celebrating success and talking openly about learnings when initiatives did not go as planned. Additionally, Efficio consultants introduced best practices and provided coaching for senior team members to ensure their long-term adoption.

The Yorkshire Water-Efficio partnership will continue to deliver value to the business through the new operating model throughout AMP7* and into AMP8*.

We’re here to help

If you would like to explore the development journey of your procurement function and related value generation and cost reduction opportunities, please contact us by filling out the form on our Procurement Transformation service page.