Moving to a contemporary, risk-based process for supplier assurance would make for an even safer and more cost-effective railway and world class supply base, says RSSB’s director of national programmes, John Abbott
Rail industry buyers have a responsibility to manage risk imported from suppliers. Supplier assurance is one of the tools used by such a buyer to establish that suppliers are suitably competent, adequately resourced, financially sound, and can consistently deliver their products and services to a customer’s specification.
However, this presents many varied and challenging issues. Supplier assurance can mean different things to different people, and many find the processes difficult to understand and use cost-effectively. History’s legacy has been the development of many different types of supplier assurance arrangements in an unstructured way. Making sense of them isn’t easy.
Trying to highlight just how urgent this is as an issue is not easy either. Procurement is not traditionally perceived as a ‘sexy’ part of any business. Its links to the safety-criticality of the running railway are not always clear to everyone. Procurement does have an increasingly important role, particularly in influencing the bottom line, and yet if supplier assurance is inadequate, the consequences are serious; not least to the safety of workforce and passengers, but also in terms of money wasted.
Getting it right
Get supplier assurance right and it should actually work in the interests of the GB mainline railway, with a view to continuously improving the level of safety, driving out unnecessary cost and improving business performance. It can contribute to better competence, better corporate memory and even better sustainability. What’s more it can have a transformational effect on the supply base, which can generate more exportability by demonstrating its world class assurance profile.
Now the rail industry is backing RSSB in running a new project to design new arrangements for supplier assurance, enabling estimated annual time-cost savings for the industry of £35million – or 375 person-years of effort.
So what’s the problem? During the 1980s British Rail started to adopt modern quality management principles to the business, which included its supply chain. Purchased products were allocated QA ratings according to criticality and supplier inspection teams were replaced with the requirement for suppliers to demonstrate management capability and systems.
The approach was common-sense and any of us can relate to it. As consumers we will pay much more attention and want more confidence if we’re buying services that have a bearing on our personal safety and wellbeing (electricians, car maintenance), compared to generic low-risk products (office stationery).
However, by the time of privatisation in the 1990s, the issue was becoming more complex. European legislation that liberalised the trade of products and services across the continent took effect, and responsibility for obtaining assurance passed – not unambiguously – to newly created individual companies within the rail industry as well as other third parties.
To make matters worse, buyer-supplier relationships were still largely adversarial, each blaming the other for poor performance.
In 1999, the train accident at Ladbroke Grove led to a public inquiry chaired by Lord Cullen. His report revealed a wide range of shortcomings in the way industry addressed safety, and amongst these was a deficiency in assurance of safety-critical products and services. Lord Cullen’s subsequent report led to wide-ranging changes to the way the rail industry managed safety, and this included a recommendation to look again at the risk and assurance of its most critical supply chains.
Industry’s response was to create RISAS (Railway Industry Supplier Approval Scheme) which is initially aimed at the high-risk, safety-critical, train maintenance products and services, which by necessity is a rigorous, process based, third party assessment which provides the means to eliminate the need for separate individual assessments and audits.
RSSB manages the RISAS scheme on industry’s behalf, and the benefit being derived is such that train operating companies are effectively relying on RISAS certification as an essential requirement for providing maintenance on these critical areas.
But for today’s railway, the broader supplier assurance issue has simply become too confusing. There are many different arrangements, different companies providing those arrangements, on top of an array of changing legislative and regulatory drivers, including the Health and Safety at Work Act, the Utilities Contract Regulations, ROGS, and there is also a Railway Group Standard, GM/RT2450. It’s a red tape nightmare which many find insensitive to risk management, developing mature relationships, safety, sustainability and cost reduction.
The rail industry wanted to establish the scale of the problem, so asked RSSB to undertake some research. The results were stark. It was estimated that, altogether, current supplier assurance arrangements cost the GB rail industry over £100 million per annum.
However, the opportunity to help suppliers to readily understand the mainline railway industry’s needs and demonstrate compliance through universally recognised evidence and processes, could save over a third of this – the equivalent in time and cost of about £35 million every year (A review of potential efficiency and effectiveness improvements in rail industry supplier assurance).
To realise this saving and reinvestment into better things, senior rail industry decision makers on RSSB’s Board – and in particular Network Rail and the train operating companies – were keen to see findings taken forward.
This led to further work which broke supplier assurance down to first principles, fully documented and mapped out existing arrangements – including the production of a guidance document Securing supplier assurance – and paved the way for a new framework, built in an elementary, risk-based way. This is the work that industry is now focussed on, and has asked RSSB to progress, in the Supplier Assurance Framework Project.
The drive to improve supplier assurance arrangements has since gathered some momentum.
Basic, shared principles of procurement management, as represented by the ‘assurance generator’, have caught people’s attention. In essence, each stage of the procurement lifecycle represents an opportunity to send and receive assurance information to and from a single information hub, across the lifecycle of a buyer-supplier relationship. This is an increasingly popular concept, but it does represent the theory not the practice. There is currently no set of single assurance arrangements that cover the whole cycle and no such single information hub exists.
But the government’s Rail Value for Money report by Sir Roy McNulty has acknowledged the saving potential identified by the work and has listed the Supplier Assurance Framework Project as a recommendation of its own, suggesting that introduction of new arrangements be accelerated.
The rail industry has also called on RSSB to align governance of all third party supplier assurance arrangements. Schemes like RISAS were already set up with industry-owned constitutions and principles, but the operation of other third party arrangements has not always been as accessible to the rail industry. RSSB now plays an active role on behalf of the industry to the future development of supplier assurance and how it might best serve industry as part of improved arrangements, whilst the schemes still retain a level of independent governance.
Finding better ways of working
More regular, focused discussion within the industry has taken place, leading to most companies nominating specific ‘champions’ to represent them and take part in a broader debate about what future assurance arrangements should look and feel like. This engagement has revealed a previously hidden craving for better ways of working.
Workshops are encouraging more frank and open discussion of the issues. Suppliers find it difficult to engage with industry on requirements. Customers find it difficult to understand what levels of assurance are required by whom and where. Working together on arrangements that can genuinely be owned by the industry should lead to better understanding on all sides.
Another barrier is the existence of different, conflicting terms and definitions. One of the first outputs of the project was the publication of an agreed supplier assurance vocabulary. Now project technical experts are engaging with the industry to devise one, universal categorisation for all the products and services that industry buys.
A further part of the work involves removing the duplication of supplier data amongst existing schemes, but more ambitiously, creating that single web-based hub as the authoritative repository for all supplier assurance related information.
It’s still early days, but the last two years has seen a big shift in industry’s interest in supplier assurance. Initial work, and the allure of better all-round business and industry performance, has generated some passion and vision in the industry – and it’s got people talking and interested in playing their part in designing a set of smart integrated arrangements which are effective, efficient and easy to understand.
However, there is still a long way to go to realise the vision. Understanding the sheer level of safety criticality at stake is imperative and this will rely on industry upping its competence and building a corporate memory to fully appreciate the role of assurance. This is a system-wide initiative and will require railway supply chain support in order to succeed. The carrot for the rail industry is improved safety at less cost, the carrot for suppliers is better support from its customers, and potentially world class assurance credentials, breaking down barriers to market and generating new export markets.
It’s a long journey, designed to establish industry consensus on its supplier assurance framework alongside a common understanding of existing arrangements, so it can decide the optimum set-up for the future – driven by the industry’s customer base – principally Network Rail and the train operating companies.
The conversations we’re having with industry reveal a desire to forge better connections that do not leave the procurement function isolated from the business of operating the railway system. Improvements in supplier assurance rely on, and in turn improve, a business’s all-round capability in terms of competence, culture, safety and performance. Recognising these relationships is an important step in grabbing attention in GB rail.
The Supplier Assurance Framework Project is managed by RSSB on behalf of the GB rail industry, including Network Rail, the Association of Train Operating Companies, Freight Technical Committee, rolling stock leasing companies, the Railway Industry Association, scheme providers and suppliers.