SUPPLY CHAIN |


The industry’s supply chain will be required to adopt “lean deliv- ery” to achieve AMP6 efficiency


AMP6 − already up and running?


Richard Ratcliff reviews the impact that AMP6 is already having and the challenges of moving from outputs to outcomes.


AMP6 IS still 16 months away but it really doesn’t feel like it. PR14 business plans will be submitted this month (December), and several water companies have already completed their AMP6 supply chain procurement and are starting to prepare for AMP6. This means consultants and contractors are already looking


at programme


optimisation, efficiency campaigns and even early start programmes.


All water companies will have their AMP6 supply chain in place by the start of year 5 of AMP5, to allow time to prepare for AMP6. This will mean a smooth start to AMP6 as opposed to previous AMPs where we have seen dramatic rush to ramp up during Year 1 of the AMP.


Ofwat has driven this change in the regulatory framework for AMP6. It has generated a greater focus on the “customer” in terms of service, customer contacts and the “willingness to pay”. This enhanced customer focus has facilitated a change process across the industry, with water companies and their supply


chains recognising


that the end customer is everyone’s client.


The regulator has also introduced a new landscape for operating in the water industry and chosen to follow other regulatory industries and adopt Total Expenditure (Totex).


This is driving a new thought process within the industry to understand the implications on AMP6 delivery and to create the appropriate balance between capital and operational expenditure.


Delivery process At present the UK water industry is trying to come to terms with the change from 25 years of output delivery to the AMP6 outcomes delivery model. The individual water company


outcomes have


been developed as part of the Customer Challenge Groups (CCG) consultation process. Water companies have then mapped


sub-outcomes and


outputs to these outcomes as part of their PR14 business planning process. The challenge for the water


Richard Ratcliff industry


is


to drive Totex and lowest cost of asset ownership through an optimised programme. AMP6 will be dominated by an ever increasing need to improve customer service, but still meet the aspirations of water industry investors. This is a good thing as having to meet customer outcomes and maintain “affordability” will drive innovation into the UK water industry. The most successful


water companies


and their supply chains will be those which put customers at the centre of everything they do and prioritise investment to meet customer outcomes.


for partners the to


companies and their supply chain


not


water just


understand this new language but to successfully map the delivery process to the customer outcomes and drive efficiency. The key will be to look for different approaches to meet the same outcomes. To


achieve AMP6


efficiency will require the water companies and their supply chains to adopt “Lean delivery” and thus drive out waste. The


will to


need


delivery process to


be maximise and


optimised resource


efficiency, take advantage of asset optimisation, increase productivity


embed


innovation. Delivering AMP6 efficiency will rely on making the right solution decision. This will be based on the appropriate level of accurate data, analysis and collaborative stakeholder engagement.


Developing an optimised delivery programme well in advance of AMP6 start is critical to identifying delivery efficiencies, flattening the supply chain delivery curve and also optimising the Tier2 production and manufacturing schedules. Producing


an optimised


AMP programme is perhaps not as straight forward as in previous AMPs, as this time there are less large, quality projects.


Capital maintenance will dominate in most water company AMP6 programmes, hence matching geography batching with water company asset renewal plans will have its challenges. AMP6 will also require us to map the delivery programme to outcomes and


Shared goals


The trend in AMP6 procurement is for water companies to contract with the supply chain based on partnership arrangements with shared goals and incentives.


Performance in


AMP5 delivery models has shown that this is driving the right behaviours, innovation and efficiency outperformance. clear


It that to integrated meet is the


AMP6 challenges it will be necessary to have an aligned and


delivery


team focused on driving innovation, collaboration and minimising waste. We are also seeing water companies reorganising their


internal structures


to minimise waste, drive integration and collaboration and focus the company on efficiency, customer outcomes and innovation.


focus


AMP6 will see a greater on


Expenditure (Opex).


Operational This


will be driven by Totex being adopted in the delivery process to drive the lowest whole life cost of assets and projects.


Water companies will strive to maximise existing asset performance and take advantage of operational headroom, as well as reducing operational costs of existing assets


and only look to


install new assets which drive out long term operational benefits.


Energy price inflation over AMP6 will drive a net energy reduction across the AMP in order to maintain energy operational costs at their present levels. This is a huge challenge as over


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previous AMPs we have seen an increasing energy demand based on the need to install new infrastructure to meet tightening environmental standards and increasing drinking water quality. To meet the Opex challenge,


capital delivery


teams will have to work hand in hand with operations teams, in driving the supply chain to design, construct and procure equipment which matches the requirements and skills of the end user.


We will see a greater level of automation and data visualisation to further maximise performance from existing assets and also allow operators to make informed decisions.


The need to improve


customer service will focus water companies on asset resilience and the need to prioritise


asset investment


to areas that achieve the greatest reduction in risk. The prioritisation process will look at the greatest return on investment and will be dependent upon using the latest and best


asset data.


Companies who can best interpret the masses of asset data and use this to prioritise asset investment will increase asset


portfolio the resilience,


have lower operational risk and thus manage customer service and contacts. Over


by


the water industry has been dominated


past 25 years programmes


of large capital intensive projects, but this will change


in AMP6. To meet the challenges of AMP6 the UK Water resource base will need to become customer focused,


and prioritisation, take on productivity


understand concepts


from


the manufacturing industry, continually innovate and be able to thrive in a changing environment.


AMP6 presents many new challenges. To succeed in AMP6 will require new skills and approaches which in turn will provide companies and individuals with exciting opportunities to grow, innovate and evolve. 


Richard Ratcliff is MWH water sector director for Europe and Africa. E: richard.w.ratcliff@ mwhglobal.com


risk


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