Prompt payment creates 'win-win situation' for Northumbrian Water

Supply chain boss describes how a fair and ethical approach to paying suppliers has made sound business sense for the company

Steve Crake, head of procurement and supply chain at Northumbrian Water
Steve Crake, head of procurement and supply chain at Northumbrian Water

As The Journal’s recently launched Pay Fair campaign continues to gather momentum, Northumbrian Water’s head of procurement and supply chain has spoken of how an ethical approach to payment creates a “win-win situation” in its business transactions.

Steve Crake pointed out that while the firm employs 3,000 people, it directly impacts 5,000 through its supply chain, on which it spends £350m a year.

The group, which runs Essex & Suffolk Water as well its services in the North East, has a total of 4.5m customers.

So, with a huge asset base, construction services make up around 50% of the spend, with electricity and its 1,300-strong vehicle fleet also making up a considerable chunk.

Around 63% of the companies Northumbrian Water deals with are based in its operational areas, so dealing fairly with them has positive knock-on effect on communities, Mr Crake said.

It also, though, made “good business sense” to attract and maintain quality suppliers as customers expected a “seamless” service.

“We are in a competitive market and creative solutions are critical,” he said. “The supply chain plays a major role in that and we fundamentally believe that working together as a team is of vital importance.

“When we go out and buy pumps, for example, we don’t procure based on the cheapest cost; we procure on best value. Essentially, for my team, we want to work with the best suppliers we can find; that’s the critical challenge.”

One way of achieving this goal, Mr Crake added, was to offer long-term contracts - a “major commitment” from Northumbrian Water that gives its suppliers “visibility” when it came to future work.

The company, which has signed up to the Prompt Payment Code, also pays with 30 days, which places it at the top of its sector.

“Many, many companies now pushing up payment terms to 60 or 90 days,” Mr Crake said. “But we have been very firm about the fact that we will continue with 30.”

For Northumbrian Water, the policy is paying off when it comes to brand reputation.

For the past four years, it has been named British Water Client of the Year, following a vote from industry suppliers, who take prompt payment into account when making their assessments.

It was also named Supply Chain Management Team of the Year 2014 at the Utility Awards, judged by peer professionals.

Indeed, prompt payment forms only part of the ethical framework in place at Northumbrian Water, which in turn wants to influence its suppliers to pay their suppliers on time.

“We’ll make the point that we are paying them on time and therefore we expect them to pay their main suppliers on time,” Mr Crake said.

“We will look at how suppliers pay their supply chain and, after a contract is awarded, we will continue to monitor their performance.

“We’ll also put control mechanisms in place that will force them to pay their suppliers.”

Through the Pay Fair campaign, The Journal is encouraging North East companies of all sizes to take a responsible and ethical approach to paying firms within their supply chain.

It is asking firms to sign the Business Ethics Pledge created by the North East Institute of Business Ethics, thereby agreeing to join with others to discuss the value of business ethics and to work with each other to transform their working environments for the better.

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