Links in the Chain

23 March 2009

Managing the supply chain and procurement systems constitute a key part of what FM suppliers have to do. Frank Booty looks at one complex and critical supply chain and the management structures and processes behind it.

FM IS A SUPPLY CHAIN. Supplier management is important. Hundreds of products and spare parts are required to maintain a building, and no company self delivers everything and every service, everywhere.

SGP Property & Facilities Management utilises smart systems to minimise costs and maximise service. As part of its management service, the team assists with how to select partner suppliers and then manages them on behalf of the client. Based in Leicester, SGP provides property and FM services that cover almost every aspect of owning or occupying a building. Indeed the company manages and provides services to over 50,000 customer sites throughout the UK and Ireland, via on-site or mobile teams, co-ordinated though its 24/7/365 helpdesk.

Tracing its roots back to the birth of FM outsourcing in the mid 1980s, Chesterton Workplace Management became part of the Johnson Service Group in 2003 along with leading retail FM provider SGP. The two organisations worked together to blend their expertise, becoming SGP Property & Facilities Management in June 2008.

The decision to bring brands together under one umbrella coincided with the appointment of MD Kevin Elliot as the company re-asserted itself as a service management organisation.

According to Martyn Sherrington, SGP’s head of procurement, “Each of our service solutions is as unique as our customers and our team of in-house programmers ensure that the IT we implement to support our service is tailored to individual organisation needs.”

Sherrington was brought into the company some with a brief of strengthening the procurement process. Within six months, Sherrington and the team had taken on the supplier management activities as well. “It is all about how we manage the supply base,” explained Sherrington. “There had been a separate team hitherto, but there were the synergies to create an integrated team for procurement and the supplier management aspects. Our first task was to see how we could measure supplier performance, which until then had been an ad hoc arrangement. We introduced two critical tools: a scorecard, which measures individual supplier performance across six (now eight) key performance indicators, and a dashboard that gives the client a consolidated view of the performance of all their suppliers. Both tools work on the red, amber and green systems approach.”

Clients can see in seconds how a supplier is performing. They can obtain a snapshot at any time of a supplier’s performance. He continued: “We found the scorecard and dashboard systems worked really well. At first the suppliers looked only at any red alerts and ignored the green elements. Now there is more emphasis being placed on the green sections and how performance can be made even better.”

Key trends are becoming apparent with over 12 months of the scorecard and dashboard systems in action. A good level of sophistication has been reached. All the work on the systems was handled by the team, who have backgrounds from different industries in both procurement and supplier management.

“Data was extracted from the system to help us design the scorecard and dashboard elements,” Sherrington explained. It took two months to get a draft in the form we were happy with. We launched it with a few clients to start off with before we were using it wholesale across the business. Everything about the work had to be credible for the dashboard to be successful.” The Helpdesk had accumulated 10 years’ worth of data spread across 40 to 50 clients – a massive amount of data. SGP developed its own Helpdesk over the decade and currently boasts four IT development staff.

“There are two key areas behind the scorecard – doing the job and telling us the job has been done,” Sherrington continued. “The eight key performance indicators inform on such things as whether the supplier has attended a job on time, whether a job was completed on time, if a fault was fixed first time, etc. Information can be relayed to the client by phone, SMS and web.

The whole system is very transparent. Indeed a number of clients now measure our performance on how well the suppliers are doing, in effect they are measuring our ability to manage the contractors. A supplier’s performance helps the key performance indicator with a client.”

There is complexity in the number of suppliers SGP is dealing with. It has an annual spend of £150-200m on behalf of clients, and more than 1,000 suppliers most of whom are UK based (some are in Ireland). The top 180 or so suppliers take about 95 per cent of the spend.

He continued: “The suppliers provide FM and property services regionally under our strategy of using specialist preferred suppliers. The advantages to the management company concern transparency. In some cases clients nominate businesses critical to their operations. But whichever we are working with select, we manage the supplier in exactly the same way, the key performance indicators are calculated and
weighted in favour of certain client objectives.

“Our business model is very much as managing agent, although in some cases we do act as the principal contractor. We can plug anyone into our model and see how they perform, and contractors can get a perspective on their own performance as well. Measuring a supplier’s performance tends to help their performance improve because they know you are measuring them. Anyone not performing is soon found out but with accurate data you can indeed win the hearts and minds of everyone involved. This enables clients to find out which suppliers are performing better for them, who’s doing the job and what it’s costing.

The scorecard approach provides a rich mix of potential and insight, such as average order values. If the supplier is charging per job, it is possible to track trends of where everything is going – who are the better performing contributors? Who are the most commercially beneficial contractors? It can show that, for example, an organisation charging £50 per hour is able to provide better value than one charging £40 per hour – the former may complete a task in two hours, say, against the latter taking three hours for the same work; you are better off paying the higher rate once you consider costs in a different way. It’s an example of how clients can utilise the value within the scorecard to identify cost efficiencies.

“In the current economic climate, outsourcing property maintenance and FM is a quick win and proven way of saving money. Some 95 percent of calls to the Helpdesk are resolved at the desk or by the supplier on site. We set up a supplier forum at the start of the scorecard and dashboard process. Subsequently our supplier managers and the team work individually with our suppliers to take the output of the dashboard and analyse where the supplier’s performance is heading. They look for trends – why a supplier is performing and how they are doing it and set out ways of improving performance. Then, by spreading the word across the supplier base we can bring in best practice so people don’t have to reinvent the wheel.

The system works. Smart systems minimise costs and maximise service. SGP selects partner suppliers and manages them fairly and rigorously. Property and FM services supply is coming of age.

A supplier's view
365 On Demand Solutions is a national maintenance and compliance solutions delivery business offering bespoke service packages to both the retail and commercial sector. Established in May 2006, the customer-focused business team has over 40 years experience in compliance services and maintenance that is the backbone of its approach.

Jeff Alden, 365’s MD, says, “We’ve worked with SGP for a number of years and have built up a good working relationship. For SGP to be able to deliver to its customers, it needs a raft of suppliers country-wide who share the same philosophy. With the scorecard, we worked initially with SGP to get the weighting issues correct so they were fair and reflective of the performance of an organisation. The scorecard helps my team to focus on the key areas to maintain a good level of service. The dashboard is crucial at a number of sites where we have static site engineers. Further, the dashboard is a key driver in planning workflow management.”

A client’s view
One of the UK’s largest retailers has had links with SGP for some four years. With up to 1,300 properties across the UK and Ireland, the retailer group operates with many household name brands.

The group’s maintenance manager says, “Historically the group had its own internal helpdesk and outsourced that to SGP. Now, we find the scorecard and dashboard systems very useful. We have two meetings a month, one a procurement type meeting and the other to do with the helpdesk. At the procurement meetings we look at things like contractors’ renewal or re-tendering and their performance record. At the helpdesk meeting we look at response times and how contractors are performing. If we find a contractor has not performed well we will initially try to work with them to resolve any issues. SGP helps us enormously in this task, having a complete raft of statistics available. In addition we also manage planned service visits to all our properties with SGP’s input.”

● Frank Booty is a freelance writer