The route of supply

First Group has revised its group purchasing strategy and implemented new management objectives to support its supply chain operations

First is the UK’s only rail operator that runs all types of passenger and train service. From regional and commuter services, open access and freight services to high speed intercity trains, overnight sleepers and local branch lines, First’s service is all encompassing.

The UK’s largest transportation company, First Group strives to provide excellent train and bus services, which will make it the first choice for millions of customers around the country. First has invested significant amounts of money in its train fleet, stations and in its staff. The future will see the group continuing to make improvements throughout its business, to provide customers with more comfortable and reliable train services.

As part of this, First Group has revised its purchasing strategy and has also implemented new management objectives to support its supply chain, from suppliers to customers. Eddie Kerr, purchasing director, tells Railway Strategies more: “A lot of people talk about the importance of engaging with the entire supply chain in a proactive and unique manner. Working with our operational colleagues we have collectively revised First’s purchasing strategy to achieve the required results for the division

There is a core in all purchasing strategies around appropriate policies, modern practices, systems and tools, particularly in terms of developing people in the procurement function. First objective is to achieve best in class performance and ensure that we engage with the customer base, understand their objectives and make sure that we don’t just concentrate on price alone. Indeed, it is equally important to focus on quality and service levels, as well as other related topics.”

Increasingly in the modern age organisations such as First Group find that they must rely on effective supply chains to successfully compete in their chosen markets. “Supply chains are extremely important,” admits Eddie. “Our remit in purchasing, is to work with our operational colleagues to enhance the value to First Group in terms of quality, as well as cost from the supply base, working in partnership with suppliers so that we can achieve mutual benefits.”

In analysing its procurement activities, First Group carried out the groundwork for identifying optimal supply strategies and determining how best to deal in supply markets. “We identified the goods and services First Group needed, as well as demand patterns for these products,” continues Eddie. “We also analysed the commercial behaviour and technical capability of the supply market, assessed our supply strategies and procurement practices and recommended ways to achieve better value for money.

“I think the biggest change we have made is that instead of relying on opinions of what purchasing should entail, we have very much drilled into and collated an enormous amount of data and developed new ideas. We have acquired the modern tools that work with suppliers in order to gain an insight into the quality of what we are buying, as well as the prices we are paying, and how our supply chain works.

“That is the first change that we made,” he says. “Secondly, before we went off and started initiating our new strategies, we presented the information we gained back to our senior executives and colleagues in other departments, in a summarised format, and asked them to offer their own ideas as to what they see as priorities. Our revised procurement function takes these priorities into account much more than previous strategies did.”

He adds: “In terms of working with the different management teams across First Group, we have actively sought to understand each individual issue and objectives in terms of customer service, operations, engineering, human resources, finance, IT and so on. Again, we have drawn that up in a fairly disciplined data driven manner, which allows for very meaningful conversations about procurement. For example, we have worked much more closely than ever before with our colleagues in HR and engineering, which were two of the very first areas where we introduced reform.”

First’s improved supply chain support, which focuses on on-time delivery, has lowered costs, while improving quality: “Where we have got mutually acceptable objectives everything runs a lot more smoothly,” explains Eddie. “Where there are areas where it looks like our objectives are potentially in conflict with each other, we are able to talk through those in a meaningful fashion.

“It is critically important that purchasing understands the agenda of other parts of FirstGroup, such as its engineering agenda. Together we have been able to tabulate and quantify quality objectives and we have come to some very good arrangements where we are able to improve quality at the same time as improving cost.“

First’s purchasing future lies in further improving its procurement function, while introducing innovative tools such as ecommerce sourcing. Joe Delaney, whose rail purchasing division has led the way in the implementation of e-commerce sourcing across First Group, tells us more: “E-commerce is an important tool. Using this we have been able to speed up the stage-negotiations process, as well as the supplier evaluations and selections process.

“The key here is transparency and speed. We have received feedback from suppliers telling us they found the system easy to use, intuitive and transparent. We are reducing paperwork and reforming the traditional tender process.”

First Group’s vision is for people to have a choice in how they travel. The company’s goal is for public transport to become an attractive alternative to the car, encouraging its existing customers to use its services more often and attracting new passengers. If this ambitious goal is to become a reality a seamless supply chain is essential.

Joe adds: “The supply chain is always evolving, but one of the major challenges will always be customer service. First is completely customer focused, which undoubtedly puts pressure on the supply chain and procurement functions. In order to offer outstanding customer service you need a strong supply base – the two go hand in hand. So, if we are to offer great customer service, we need to team up with as many quality suppliers as we can.”

Eddie concludes: “Our commitment to continuous improvement and the raising of standards and procedures throughout our procurement operation is relentless. What we are looking for from suppliers is not just the ability to compete on price or offer a quality product. We need them to offer both.”