The Elephant in the Room
Around the World, various intriguing methods are used to source water. Take the Samburu people of Kenya, for example, who rely on wild elephants to help them find water when the rivers run dry since elephants have a natural ability to detect underground water. Tracking the elephants closely, the Sumburu are able to draw water from the shallow wells that the elephants leave open for them. Back in their village, they thank the elephants by filling troughs which they leave out for thirsty animals.
It’s a stark reminder of how lucky we are in England to have water on tap, readily available and relatively cheap to boot. And yet, we too have an elephant in the room. It’s called the English water market opening.
How can it be that, with a little over three months before shadow operations (testing the market) commence, many businesses are still burying their heads in the sand rather than taking action when it comes to their water supply contract? Is it because water is currently seen as relatively insignificant when it comes to sustainability challenges? Or perhaps because it makes little impact on the bottom line? Is there simply still a lack of awareness of the opportunities that this market transformation could open up for forward thinking businesses across England? Or is it perhaps because water, unlike most of the rest of the supply chain, is unchartered territory and, therefore, a potential minefield?
“Many businesses are still burying their heads in the sand rather than taking action when it comes to their water supply contract”
A Trump Card for Sustainability Managers
It needn’t be. Even in commercial operations where more attention is sometimes given to short term cost reduction as opposed to driving long term strategic value, water is actually an area that could provide both: a quick win and good returns over the longer term. If that’s not a trump card for sustainability managers negotiating in the board room, then I don’t know what is!
Having the opportunity to switch suppliers, says OFWAT, could mean that you benefit from “a wider choice of tariffs, better standards of service, tailored service offerings, advice on saving water and lower prices” – all (and this is the crucial bit since it applies to so little in traditional supply chain networks) with a cast iron guarantee that there will be no reduction in the quality of the product.
In Scotland, where the water market opened some time ago, over 130,000 commercial customers are already enjoying the benefits of being able to shop around for water. There, over 50% of companies have renegotiated with their water supplier and many have already switched.
Navigating the World’s Largest Retail Water Market
As with any procurement exercise, you’ll naturally want to find out about suppliers’ charges, their approach to account management and customer service, whether they can provide any additional added value, and, should things go wrong, what they will do about it. But, when it comes to water, there’s a strong case for taking the time to gain a deeper understanding of your company’s current and future potential operational water footprint before entering into contract negotiations. It’s also a good time to consider deploying water saving technologies as part of a holistic water strategy.
The water market, just like the gas and electricity markets, is a complex one. With 1.2 million customers and a total market value of £2.4 billion, England will be the largest retail water market in the World, creating a wide variety of challenges such as price variations, metering issues, billing inefficiencies and overly complex tariff structures.
With 1.2 million customers and a total market value of £2.4 billion, England will be the largest retail water market in the World
Six Steps to Transform Water Consumption in your Company
Just like the Samburu have elephants to guide them through the water landscape, those professionals responsible for water in their business can also benefit from working with a partner that has expert knowledge. That’s why I suggest a six step procurement strategy which embraces continual improvement.
It goes like this:
1. Strategy Development: Define a strategy for the next five years to deliver on key drivers including water consumption reduction, supplier service levels, costs and terms.
2. Solution Design: Develop a complete water consumption data-set for supplier comparison, while setting out desirable contract terms and reduction targets.
3. Virtual RFP: Conduct a pre-tender review of available options looking at pricing, servicing, innovation and added value services such as AMR.
4. Competitive Tender: Run an outsourced end-to-end tender process incorporating supplier selection, RFP preparation, supplier management and negotiation. Water retailers should be judged on best support services to help deliver strategic goals, innovative solutions tailored to the client’s needs and expert market and competitor analysis.
5. Contract Negotiation: Provide expert advice to procurement teams to deliver the best outcome, looking at flexibility, improved SLAs and further cost and consumption savings.
6. Water Bureau: Conduct ongoing supplier management to deliver against the strategic plan, including data and financial management to drive down fixed costs and support water reduction programs.
This approach is proven to work. Our water supply procurement process has achieved, on average, savings in excess of 20% in Scotland. Recently, we announced that we helped save Tesco £750,000 on its water costs by using this comprehensive and logical approach.
Isn’t it time to shoo the elephant out of the room?