An innovative market-testing method shook up procurement and generated millions of pounds of savings at United Utilities. As a regulated water company, it has a duty to demonstrate it is using markets to deliver best value for customers. In response, for the forthcoming regulatory period, the utility developed the Market Engagement Methodology (MEM). This consists of a number of steps designed to challenge historic thinking about the supply chain and delivery models used, generate commercial options and create best value.
At the heart of MEM are six stages: testing priorities; business needs; test selection; testing; review and implementation. It follows a systematic approach, with reviews and challenge gates to define the need and test the outcomes. The methodology has been applied to 100% of anticipated business needs within the utility’s planned programme of work. As a result, in 64 engagements with the market, buying behaviours were fundamentally challenged. An overall reduction in aggregated call-off was demonstrated, as well as increases in outsourcing, strategic relationships and spot buying, among others. In total, savings of £359m have been identified against an anticipated programme cost of £5bn.
“Outstanding,” is how judges rated it. “A truly leading tool for route-to-market and guiding procurement to select the right strategy.”