Wates Group has outlined how it uses a blend of central procurement and local buying to optimise its supply chain.
The construction group, which has a turnover of around £1.6bn, spends roughly £1bn annually.
About half a dozen key organisations pick up about 80% of Wates’ direct spend on products, while building sites are able to source some products and services locally, David Oates, procurement director at Wates Group told SM.
Any company that sells directly to Wates must go though a validation process that assesses its environmental, community and inclusivity credentials, “and then we have regular review meetings with these organisations as well to ensure that they are delivering on those,” said Oates.
“But we really do keep it quite tight in terms of the companies who supply products to us.”
Each of Wates’ construction projects “is its own profit and loss centre effectively, working within a region”, said Oates. But they all share the same rules of engagement when it comes to procurement. “There are some core areas that they have to adhere to and use the processes that are set out within the business to ensure that we’ve got a real cradle to grave, reporting and line-of-sight procurement strategy.”
Wates has a set of key central procurement agreements that projects are expected to buy from but the company is flexible over materials including concrete, where the nearest supplier to the site is generally the most competitive, said Oates.
“We’ll set the strategy for concrete, the type of expectations that we want a concrete provider to supply to us. The guys will then be able to go out to the market,” said Oates. “So there’s a competitive angle to it, but they don’t just do it on price. Again, it’s a validation process that these companies have got to adhere to.”
Sustainability as part of the procurement strategy is considered from the bid stage of any project. “The only way that we’re really going to address this [sustainability] agenda is to link it in right at the onset of us looking at a project,” said Oates. “If we’re successful, this procurement strategy then rolls into delivery and it’s not to be changed.”
Using social enterprises is also one of the ways Wates aims to meet its sustainability goals, particularly around skills and employment.
Social enterprises have a general theme of providing employment opportunities to people furthest from the labour market said Rachel Wolliscroft, head of sustainability at Wates. “However, through that they may target specific groups, whether that’s ex offenders… people with disability, whether it’s long-term unemployed, whether it’s people with mental health issues. They’ve all got various bands of social impact that they deliver.”
Wates is aiming to spend £20m with social enterprises by 2020. This is a small percentage of the group’s supply chain spend, but Wolliscroft said the sector’s market is still maturing and there are not yet social enterprises in big spend areas such as electrical and mechanical.
“We’re helping to support the development of new social enterprises by working with different organisations like SEUK [Social Enterprises UK], the Institute for Social Entrepreneurs in Birmingham, which help to look at where their market opportunities are and support new businesses setting up in those areas.”
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