Forging resilient supply chains

  • Complex supply chains bring new savings, and new risks
  • Dealing with contractors and sub contractors broadens housing associations’ exposure
  • Weighing contracts towards quality – not just cost – is essential to building resilience

No-one doubts that the last few years have been tough for housing associations. Old assumptions have gone forever, and new ways of working have had to be embraced – fast.

But, while the response of many has been a triumph of management and team spirit, successfully meeting tough financial challenges has in some cases meant unwittingly compromising resilience.

“I think one of the main issues that we’ve seen in recent years is that, as housing associations diversify more, their supply chains have broadened, their situation has changed and their risk exposure has got a lot more complex,” says Michael Hutchison, Housing Sales Manager, at Zurich Municipal.

“Many associations still  do not understand the implications of this. They are in a situation where they no longer have to just deal with the one contractor;  they find themselves having to deal with multiple contractors and sub contractors, for a broader range of services.”

But understanding this new exposure is often far from straightforward, with many housing associations not realising that they may be quite a small customer to their contractor. If that contractor is under stress elsewhere, they may start to divert resources, and the housing association may find itself facing a reduced level of service as a result.

Ask the right questions

Mitigating risks like this means asking the right questions when you put services out to tender.

If you accept that you will sub contract work, how will you make sure that your service level agreement is actually carried through? Have you risk-mapped this supply chain? Does your contractor have answers to your questions? The firm that can give you a detailed breakdown of its own risk – and risk management – probably represents good long-term value.

Of course, much of this is easier said than done. But in order to successfully develop new procurement processes, housing associations need to engage deeply with a huge amount of complexity. Frequently some risks will not even be obvious until you start mapping your exposure.

“Do you really understand what will happen if a contractor goes bust?” asks Michael. “How are you going to manage to maintain services if this happens?”

Avoid reputational damage

Getting any of this wrong carries the risk of very real reputational damage if mistakes impact on tenants or start getting traction in the media; even if a claim is levelled at your contractor, in the public mind it’s the housing association that is ultimately responsible.

If you get the wrong supplier, then over time any cost savings that you put forward are going to be eaten up by the other costs that come from going with what turns out to be a cheap but unreliable choice

Michael Hutchison, Housing Sales Manager, at Zurich Municipal

Key considerations should be to weigh your procurement process towards quality rather than just price, and not just talk about ‘partnerships’, but actually work in partnership with your contractors.

“Savings are, of course, important. But if you get the wrong supplier, then over time any cost savings that you put forward are going to be eaten up by the other costs that come from going with what turns out to be a cheap but unreliable choice,” says Michael.

With this in mind it is particularly important to minimise the risk of isolating your organisation, by maintaining relationships with a wide range of suppliers. Explain to everyone you work with that, while you will go to the market with contracts, you want to work with the people who have performed for you over time.

In the end, a supply chain should be just that – a chain – and the key to building a strong chain is forging it link by link out of material you can trust not to snap or fracture when it’s time to pull hard.