You may be familiar with world-famous Yorkshire magician, Dynamo, but you won’t know that the man and the word also inspired the name for Yorkshire Water’s commercial procurement cost savings initiative, “Project Dynamo” … a.k.a. the £25 million Yorkshire Water challenge.
Providing drinking water and wastewater services is only the start of what Yorkshire Water (YW) does. While collecting, treating, and supplying 1.3 billion litres of water each day to keep the taps running for more than 2.3 million households and 140,000 businesses is essential business, YW is equally committed to providing a tailored and transparent service to its customers at the best possible price.
Traditional private sector businesses create value through profit to shareholders – typically with price being paramount. However, utilities and public service organisations with regulated pricing structures create value from cost savings – savings that are utilised to better serve customers.
Cost savings is at the heart of this challenge, as is the formation of a unique retained partnership between YW and Efficio to deliver value to YW customers over the long term.
At the beginning of 2020, YW faced a significant funding challenge from its regulator, Ofwat, resulting in: “Procurement needs to deliver £25 million in savings by 2022.”
The procurement function was not initially well positioned to meet this challenge, as it primarily operated in a reactive, administrative manner, focussing on Utilities Contracts Regulations (UCR) compliance over value delivery.
However, the ROI for a procurement cost savings had a very favourable forecast, so the broader business’s commitment for a sweeping commercial transformation was accordingly high.
In addition to delivering £25 million in critical savings, the project also required procurement to change policies, processes, technology, and people. Along the transformation, the integrated procurement team fully positioned itself as “Commercial Services”, resulting from a significantly expanded and elevated function throughout the YW organisation.
Having surpassed the requested £25 million in savings target – with current savings to date at £37.8 million and on track to reach a forecast £53.2 million by the end of March 2022 – the savings pipeline continues to grow. Improvements in data quality and increased engagement with the business are paying dividends, and we now have a proactive pipeline to deliver £97.1 million by the end of March 2025 (£246.2 million cumulative impact).
Efficiencies driven by new processes and technology mean that the average time to complete a strategic project has dropped by ~30%.
We also now have a deeper and broader involvement in business commercial decisions. We offer ongoing training, embedding a commercial mindset throughout YW, acting as commercial advisors. We consistently facilitate “make versus buy” decisions, run whole life cost modelling, support the sustainability programme, and we now have deeper involvement in the capital programme.
This achievement of value, collaboration, and capability demonstrates the team’s commitment to excellence – all achieved without compromise to stringent risk policies or UCR regulations, but by overlaying commercial excellence, effective technology, and pragmatism to new and improved ways of working.
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