Strategic Sourcing A case study from the London 2012 Olympic and Paralympic Games

1. Strategic Sourcing A case study from the London 2012 Olympic and Paralympic Games Phil CholewickCanberra, 05 July 2012

2. Phil Cholewick • Who - 2012 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

3. Supply Chain Challenge • 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 2012. • There is ever decreasing time frame.

4. London 2012 G A M E S Starts 28 July 2012 26 Olympic sports 20 Paralympic sports 15,000 athletes 29 competition venues across the UK 10.8 million tickets 70,000 volunteers O T H E R • 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 =

5. 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

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

7. 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

8. 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.

9. 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

10. 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

11. Tackling the problem Engagement with Demand and Supply Sides • 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? • 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?

12. 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.

13. 2nd 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

14. 2012 Supply Chain Stakeholders • Recognise that its not just Olympic Partners that have an interest in, and will contribute, to the successful delivery of 2012.

15. 3 Sided Approach to Managing Risk

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

17. 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.

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

19. Last Words • 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. 1 2

20. Thanks For Listening • Contact Details for Phil Cholewick • Ph: +61 (0)2 6162 1149 • Email: jbs.info@jakeman.com.au • www.jakeman.com.au