Strategic Sourcing A case study from the London 2012 Olympic and Paralympic Games Phil Cholewick Canberra, 05 July 2012

Phil Cholewick Who Olympics and Paralympics Head of Supply Chain Management - On loan from the Home Office (Deputy Group Commercial Director). What - Strategic interface for UK Government with 2012 private sector delivery partner and local government/Arms length public sector organisations. Why - Supply chain ‘resilience’ now seen as a high risk across senior stakeholders. Need to gain greater value. When – 18 months +18 more working with Olympic security. 20 years experience overall

2012 Games requires biggest supply chain since the Second World War Some six weeks of Games activity requires supply chain activity spread over several months during 2012 and procurement over several years. The value of the supply chain (excluding construction) is estimated at around 2 billion $ AUD. Not just about directly supplying the Games but also other business as usual activities during Summer There is ever decreasing time frame. Supply Chain Challenge

London 2012 Starts 28 July Olympic sports 20 Paralympic sports 15,000 athletes 29 competition venues across the UK 10.8 million tickets 70,000 volunteers GAMESGAMES OTHEROTHER The Cultural Olympiad Parallel events and festivals The Torch Relay Business as Usual activities – 7 million people in the capital alone Supply Chain Risk (and Opportunities) Common/critical goods and services have an impact on the delivery of a safe and secure Games. = London and UK wide

In the Beginning 2009 – start of the Olympic Journey Multiple Delivery Agencies involved Procurement Holistically - No one knew who’s doing what & when? Different level of maturity, skill and resources (Not too mention priorities) Lack of information on total demand and, Unknown Supply Chain capability/capacity

The Procurement Players The Procurement Players The Government Olympic Executive Greater London Authority = Mayor of London London Organising Committee for the Olympic Games - LOCOG Nations Security Police forces nationwide

Supply Chain and Procurement Risks Procurement is too late Supply can’t meet demand Supplier capacity is insufficient Pay more than needed Suppliers fail Olympic Buying Authorities compete against each other driving up prices unnecessarily Supplier price works on ambiguity and buyer ignorance

The Real Risk The reputation of the Games as an event. Cost of the Games. Value for money called into question. That some local / regional events are cancelled. Political capital. The reputation of the city of London and nation as a whole.

Action - Phase One Developed a Strategy that established the Olympics Procurement Group Terms of reference based on Information Exchange Consider the implications on the supply chain of multiple organisations procuring the same goods and services for 2012 Explore opportunities to drive out better value through collaboration. Establish a strategic approach to sourcing

Strategic Sourcing Used as: Integral part of a wider business strategy Improve profitability/Service delivery Manage Risk to business operations/costs Includes Demand and Supplier Management

Tackling the problem Engagement with Demand and Supply Sides Client Side : Procurement Group Who is buying what? What do clients want from suppliers? What contracts are already held with suppliers? Has there been engagement with suppliers? Supply Side: Supply chain management What can suppliers provide How much can suppliers provide, is the market large enough for Olympic demand? What is the critical path? How can we manage critical paths?

Analysis Output Data collection and information exchange: Buying Authorities (CPPG) Holistic Overview of Demand from Olympic Partners Data Analysis (LECC) Holistic Overview of Demand from London Events Organisers Industry communication Overview Market Capacity Identified a supply/demand imbalance for: Key events related goods and services These common/critical goods and services have an impact on the delivery of a safe and secure Games.

2 nd Phase Produced supply chain strategy identifying key categories and approach to managing risk Produced category management plans for each Developed stakeholder communication strategy Targeted Industry groups, Key suppliers and Events to stimulate interest and supply Targeted Demand side to limit unnecessary demand – London Events Coordination Calendar Addressed commissioning groups with information to better inform decision making Collaborated on procurement / contracts to maximize VFM

Recognise that its not just Olympic Partners that have an interest in, and will contribute, to the successful delivery of Supply Chain Stakeholders

3 Sided Approach to Managing Risk

Supply Chain Risk Mitigation Guidelines issued to all potential 2012 Events Organisers Recommendations issued for the attention of licensing personnel

Strategic Sourcing and Risk Management Having a strategic sourcing approach was critical in: Managing supply chain risk – capacity and capability Influencing procurement activity across multiple organisations Segmenting spend categories to focus efforts on (critical and/or maximum value) Exchanging information between organisations led to better value for money outcomes both in contracting and managing supply chain Enabled spend decisions to be made with the benefit of clear information Encouraging organisations to build relationships with suppliers and work together to mitigate supply chain impacts. All of these successes contributed to managing the really Big Risks.

Outcomes Helped manage Risk to Games delivery - sufficient capacity and capability Challenged normal thinking – Let the market decide!! Engaged and worked with Industry effectively Leveraged procurement spend more effectively Established effective collaboration & Co-operation across multiple agencies Got supply chain and procurement recognised and placed on Executive top 10 risk register Obtained value opportunities from nothing Left a legacy across public sector and private sector partnerships Secured better prices for smaller agencies and better VFM overall Ensured that Contract Management is a viewed as a key part of procurement tool set Raised profile of procurement as a strategic value adding function and not ‘blocker’ Established productive and lasting relationships across diverse networks

Last Words 1 2 Identifying that there is a potential problem and getting others, including Senior Exec’s, accepting is fundamental. Communication of the big Issues and Risks are key! But it’s only half of the solution. Developing and then executing the strategy effectively. Bringing your stakeholders with you on the journey. Stakeholder communication and engagement is critical. Strong leadership along with a great team is a must have.

Thanks For Listening Contact Details for Phil Cholewick Ph: +61 (0)