Why Go-Ahead shook up its procurement strategy

4 October 2021

Travel company Go-Ahead has decided to heavily increase its spending with SMEs following the pandemic to boost innovation.

Go-Ahead, one of the UK’s largest transport operators, told Supply Management it will spend at least £250m per year with SMEs from 2022 in a bid to attract greater innovation to the transport sector and meet sustainability targets. 

Glyn Watts, group head of procurement at Go-Ahead, said OECD research that found 70-80% of SMEs had experienced a drop in revenue since February 2020 – with some facing drops of up to 50% – had also prompted the decision.

Watts told SM: “We recognised pretty soon after the pandemic started that SMEs were likely to be disproportionately impacted by the pandemic, and unlikely to be able to respond or be as flexible as many large companies. As we've got £2.5 billion worth of spending power, we thought we have a responsibility to do something.”

Working with SMEs allows for greater innovation and an opportunity to “disrupt the supply chain”. 

“If we always go to the same suppliers, if we always advertise with the same portals, we're always going to get a similar result, or a similar set of suppliers,” he said. 

Watts said working with SMEs enables companies to localise supply chains, which “allows us to get much closer to our customers and embed ourselves in the communities we serve”. 

Working with local suppliers can drive sustainability targets, Watts said, by having suppliers “on the doorstep”.

The company has introduced sustainability weightings in tenders of at least 5%, but this figure is often 10% and above, which it hopes will drive change throughout its supply chains. 

“Suppliers will start to win and lose business on the back of sustainability factors. So they need to adapt, and they need to adapt quickly, if they want to do business,” said Watts.

Procurement has fundamentally changed focus in the past four to five years he said, with greater focus now being placed on social value factors. This means while the lowest bid often previously won contracts, Watts is increasingly finding that companies with greater emphasis on sustainability are winning. 

Sustainability and social value factors “are becoming a key differentiator between our supply base who can react to our priorities and who can't.

"This can easily swing a tender. It has happened recently on car parking and some of the other big tenders we've run. The companies which are big in that area have managed to get 10% of the marks, and it didn't matter they were more expensive, they won the business.”

The pandemic and drive to net-zero has highlighted the importance procurement teams play within driving sustainability goals. 

Watts described procurement teams as “gatekeepers” and procurement teams need to ask: “Is there a different way to do this? Is there a better, more clever way to do this? A way that doesn't impact the environment in the same way, or is better for our passengers?”

The company is currently at the centre of controversy after the Department of Transport did not renew Go-Ahead's franchise for Southeastern trains after it was accused of not returning more than £25m in taxpayer funding.

A Go-Ahead spokesman said: “We are naturally disappointed that our Southeastern contract is coming to an end. The rest of the group is unaffected, and our strategy to boost spending with SMEs will remain in effect at all our other UK bus and rail companies.”

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