John Adams, Group Procurement Director at Barratt Developments explores how the company’s competitive edge comes from supply chain capability.
In recent years, an increasing number of organisations have begun to recognise supply chain and procurement as a key facet to their operations. As a result, the very perception of supply chain has changed and is now being positioned as a key competitive advantage and in places where it can’t it represents an opportunity for businesses to unlock opportunity and other greater benefits. To put it simply, gone are the days where supply chain simply represented a means of saving money. “Clearly that’s part of what we do, but there’s much more to it than that,” explains John Adams, Group Procurement Director at Barratt Developments Plc. “The business or businesses generally should see it as a strategic operation now. It’s about a much broader span of topics, and the organisations see procurement as an integral part of the efficiency of the business, not as a side act.”
Barratt Developments Plc is the largest house builder in the United Kingdom and is the only major house builder that has successfully achieved and retained the highest customer rating for ten consecutive years. Key to this success is a vision for leading the future of house building that is driven by putting customers at the very heart of what the company does. In order to realise this vision, Barratt has spent the best part of the last decade investing in and reorganising its supply chain in order to redefine how the business works with its suppliers so that it can better serve them. For any business, the supply chain is a complex ecosystem that needs to run like a well-oiled machine and for Barratt Developments, this is no different. “In the role I’m in it costs us more not to have components than it does to have cheaper components,” explains Adams. “Cost and availability of product is of course very important but there are many other areas such as the sustainability angle which are becoming increasingly prevalent and heavily influencing the supply chain and how it operates.”
“I spend a lot of time with some of the key stakeholders in the business trying to help them understand why supply chain is important, why things they do influence what the supply chain can, and cannot do for us, and how they can change some of their behaviour to enable the supply chain to be more effective and more efficient, which then benefits them.”
The goal here for Barratt is to engage all facets of the organisation into the importance of the supply chain, removing the reliance on the notion of a single procurement responsibility but a much more shared one. Adams believes that everyone should be talking to suppliers, not just procurement professionals. “At the end of the day, we are not necessarily the subject matter experts on everything,” he says. “So we need those subject matter experts to be engaged with the suppliers so we can have the best interaction with them.”
Barratt Developments central procurement team controls around £500mn of annual spend, both direct and indirect. Direct spend accounts for close to £450mn of that overall spend and Barratt’s success is defined by its aim to provide its customers with the products they want at the right time and of the right quality in order to receive the positive experience of a new build. In recent years, the scrutiny on the quality of the products has tightened while the volume output has rapidly and so Barratt works tirelessly to ensure that it has the supply chain in place in order to feed the machine. “Our main focus has been making sure that we have a supply chain in place that’s capable of feeding the machine that we’ve got now and the one that we will have in the future,” says Adams. “We also have to look at new ways of producing housing because there’s a skill shortage that’s coming and we have to be ready for that.”
In order to ready itself for this skills shortage, Barratt works to either de-skill or remove the requirement for skill onsite wherever possible. This is where the company embraces ‘modern methods of construction’ in which Barratt’s design and technical teams work closely with the supply chain in order to both trial and mature technologies and practices the business wouldn’t traditionally use. Barratt will then integrate this into its day-to-day business as usual production facility and capability. “From a strategic point of view, it is matching supply chain capability with our demand,” says Adams. “And then in the long term it’s looking at new methods of construction, and developing a supply chain capable of supporting us over a long period of time.”
One of the largest challenges in trying to constantly feed a machine that is responsible for more than £500m in spend is that of coping with demand fluctuations . Over the last decade, market upswings and downturns have been unavoidable and this of course will impact the supply chain ecosystem. Trying to transform a supply chain while operating in a volatile market is no easy task and Adams acknowledges that Barratt has had to ride both the highs and the lows in order to remain successful.
“Market upturns and downturns both present challenges, just different ones!” he says. “Through the downturn we very much had to focus our demand with fewer suppliers so that we kept those suppliers in a good state of order and that they were able to support us in the upturn.” This approach saw Barratt work with suppliers during this downturn and then continuing to work with them during the upturn so that the suppliers had the capacity to meet the demands of Barratt and its customers. This required more focused and sometimes challenging conversations. “It’s been an interesting journey because in this industry, some elements of supply chain were not historically as mature in their thinking in areas such as capacity planning, problem solving and root cause analysis as is required in a very dynamic demand cycle business. Consequently Barratt has invested time and resources into helping develop some of these capabilities with key suppliers.”
says Adams. “We’ve spent quite a lot of time trying to develop the supply chain because I’d much rather work with somebody that I know that is willing to work with us than bring somebody in that I don’t know, and start a brand new relationship.”
Refocusing supplier relationships is never an easy endeavour. On paper it makes sense and is easy to break down, but the reality of the situation is never that simple. For Adams, the key to successfully navigating this was to break down what he describes as ‘very adversarial’ old working practices that are common within the industry. “It’s about trust. If you haven’t got that between yourself and your supplier, you’re not going to get very far,” says Adams. “The first thing to do is to change people’s view of what our supply chain is, what it does for the business and how important it is. Once you achieve that, then you have a much easier engagement model.”
Barratt has a tiered approach with regards to its supplier engagement model that sees the executive engagement level shift accordingly based on the strategic nature of the supplier relationship. “As you go down the tier of the supply chain, the relationship engagement will fall to either myself to have the leading relationship or my team leading the relationship explains Adams. “We ensure that we have a relationship with the senior management team of all of our suppliers, so that we can get the right level of engagement with them.”
Through this approach, Barratt is able to work to identify any issues between it and the supplier that will prevent either party from being efficient and get to the root cause of those issues by making changes where necessary. Part of this dynamic is built upon that trust and understanding and so in order to achieve this Barratt hosts a number of supply chain conferences that brings all of its suppliers together to explain what is going on, what the vision for the future is and what expectations Barratt has for its supplier base. “They understand our objectives and how they fit into that,” says Adams. “We then have somebody in our team who is specifically engaged to look at supply chain development. When required we have the ability to help suppliers understand techniques and approaches to improve performance, typical examples being problem solving or route cause analysis approaches”
“But, what’s important is that we don’t just go to the supplier with the tools and say: Fix this. We provide a methodology and a suggestion as to how they can use understand the problem and solve it.”
For Adams, this all forms part of the broader commitment that Barratt has to its supply chain and make sure that the company has a set of suppliers that can deliver what it needs to the right quality and at the right price. Barratt has been investing in and reshaping its supply chain now for over a decade and in that time, thanks to shifting market dynamics, it has been clear that the road is never truly a straight line. In order to successfully navigate this and any journey, organisations need collaboration. This is where Barratt’s supplier relationship model really stands tall above others as a true competitive edge. “Not every egg is going to be a bird, so you have to be prepared for investing in something that may not provide a business benefit in the end,” says Adams. “You will have failures and you can take learning from them. What’s important here is sitting with suppliers and working it all out. What went wrong? Why did it go wrong? What was the process? And so on.”
“I think it’s incredibly important to be able to go through that with your suppliers in a structured way, regardless of the success of the project or not, and be honest so that every single person understands the highs and the lows so that you actually learn from the whole experience. That’s what our approach allows us to do.”
After 10 years of change, Barratt is already having discussions about the next 10 years. The future is very much here and now for Adams and Barratt and so this supplier engagement model becomes a state of constant conversation and investment. As Adams noted, it’s about having to constantly feed the machine of today and of tomorrow. The market is already showing signs of significant change with sustainability impacting the legislation and governance of building homes. Barratt’s approach remains the same.
“There’s quite a challenge for us to make sure that the supply chain is aligned to those changes,” says Adams. “Key to any of that, is people. People. People. People. The ability to deliver absolutely rests on the people who are doing that delivery. They are pivotal to what we do, and to everything we do. The basic building block is people in the team and their capability, and ability to be able to understand our challenges then translate that into future supply chain requirements, helping our suppliers to innovate, develop and mature their approaches to align with these future requirements.”