More Brick For Your Buck

 

A new report suggests social landlords could save £1.7bn in R&M costs by the end of the decade. How do they gain this material advantage?

A new report suggests social landlords could save £1.7bn in R&M costs by the end of the decade. How do they gain this material advantage?

The Story

Last week, a report commissioned by the Travis Perkins Group declared that social landlords could collectively save £1.7bn by 2020 by changing the way they supply and manage repairs and maintenance (R&M) materials.

As someone who has spent the last six years working not only in social housing but specifically within the world of asset management and maintenance (A&M), this story was of interest to me…but not, it seems, many others. I’m not aware of any other significant commentary on this latest report.

Which is a shame, not just because I’m an ‘A&M guy’ but because in a time when social landlords are being squeezed tight by welfare reform and funding cuts it is important to identify any area of inefficiency (the report states R&M for social housing in 2013 was in excess of £7.5bn across Great Britain) and plug the gap, especially when the gap relates to the maintenance of housing itself. This is what landlords primarily deal with, right? Homes provide the basis for safety, security, health, education, and a host of other essential facets of society.

As I’m fond of saying – and I say it because it’s true – asset management matters.

So, what room is there for improvement? How do we gain the material advantage?

Material Advantage

“With social housing providers under continued pressure to do more with less, the smallest inefficiency can cause much larger issues for authorities…” – Ian Church, Managing Director of Travis Perkins Group Managed Services

The report, Material Advantage: A study of the cost of materials supply inefficiency in social housing repairs and maintenance in Great Britain, commissioned by the Travis Perkins Group and based on research conducted by MindMetre Research, states a re-engineering of R&M material purchasing and management housing associations and local authorities could save over £285 million per year (£157 million for HAs and £128 million for local authorities). Importantly, Material Advantage reports that such savings could be made regardless of whether R&M functions are outsourced – subbed, as those in A&M might say – or supplied in-house via direct labour organisation, i.e. DLO.

Best Practice – More Brick For Your Buck

I’ll save my personal recommendations regarding efficient A&M for another blog – for now, I’ll review those areas that Material Advantage asserts have the potential to yield the aforementioned savings: purchasing, distribution & supply, and management.

  • Purchasing

The two suggestions made here are to shorten the materials supply chain, and deploy product standardisation.

The first proposal suggests cutting out intermediary suppliers and purchasing repairs materials direct in order to drive down costs. For larger organisations, this might mean procuring an exclusive contract with a larger supplier and leveraging that arrangement for savings, especially over time (remember that a supplier will be able to offer you better deals the better you can forecast your R&M requirements.) For smaller organisations, you may want to consider what less well known companies and independent, local suppliers are able to offer: money spent on local suppliers is also money spent on the local economy, which can benefit a smaller social landlord – potentially, you may choose to spend more on a local supplier if the community gains are worth the additional expenditure.

The second proposal makes sense – needing to supply only 3 styles of kitchen tile is far more cost-effective than needing to accommodate 15+ styles, for example – but a balance needs to be struck regarding tenant desires. Product standardisation doesn’t mean you go full-Henry Ford and offer only a single choice – “Any customer can have a car painted any colour that he wants so long as it is black” – it just means you sensibly control the range of options that are available. This will lead to greater efficiencies in material supply, installation and repair due to the standardised nature of elements. Tenant consultation should be a serious consideration here – having tenant input from the start can mitigate future complaints and issues regarding material types from manifesting in the first place.

  • Distribution & Supply

Here, the report advocates a Just-In-Time (JIT) approach, citing that where effectively implemented efficiencies are found in reduced storage costs, internal delivery requirements, and improved accuracy of van stocks. JIT relies on accurate forecasting of requirements, so to implement this change – and I don’t think it’s an accident that the report stresses “where effectively implemented…” – you’ll need to make sure you’re analytics are up to scratch and stock data highly accurate, which for larger organisations will be more difficult than for smaller ones. Personally, I’d only experiment with JIT on those elements that were not directly tied to health and safety, such as gas (boiler parts) and electrics – I wouldn’t want to jeopardise the ability to respond quickly to an unanticipated spike in repairs (perhaps, say, around a particularly bitter winter) because of a lack of parts, vans, etc. It’s just not worth it.

  • Job Management

Following the first two areas for improvement, Material Advantage finally suggests that with intelligent stock purchasing and delivery, systems can then be focussed on improving the success rates and efficiency of actual R&M jobs. Certainly with sufficient material stock, particularly of a standardised type, and a delivery system supported by accurate asset data it should, with the right management structure, be possible to improve both the number of repairs that can be affected on time and those ‘right first time’ (reported as typical increases of some 10% for each), something that all social landlords should be striving for – repeat call-outs for failed repairs are not only a waste of time and resources but a particular annoyance for tenants, and understandably so.

Do the managers of your R&M functions have the appropriate skill-set and/or experience? Human resource management skills are essential for these positions of course, but too many asset management divisions are let down by managers who do not have sufficient technical knowledge of the work or systems involved in R&M. This doesn’t need to be manifest through a piece of paper, either; experience is in my…ahem, experience, more important, especially if it pertains to an organisations particular asset management systems – understanding the links between back-office and on-site work could prove vital in implementing efficiencies.

Included in this section is the suggestion to reduce sub-contractor reliance, which I heartily agree with. When repairs or asset management functions lie with a contractor who then sub-contracts it to a smaller firm…who then sub-contracts it to someone else…who then…well, the chain can only go so far before delivery control spirals out of control and quality become increasingly hard to audit, let alone improve.

Obviously, depending on the size of your organisation you may not be able to avoid a degree of sub-contracting – and that is fine. Just be mindful of how you track and control the R&M work and place appropriate monitoring and governance tools (KPI monitoring, failure-to-deliver charges, etc.) to ensure that you don’t lose sight of how your organisation delivers repairs and maintenance to the most important party in the chain – the tenant. If any part of that chain isn’t pulling its weight either strengthen the link accordingly or, depending on contract clauses, cut it out. Sometimes it’s better in the long-run to ditch a failing contractor and start afresh than attempt to keep a solution in place that clearly isn’t suitable to either party; your tenants will be the ones to continue bearing the brunt of that failing relationship if not.

Conclusion

It would be easy to dismiss this report out of hand straight away – a report commissioned by the Travis Perkins Group, a FTSE100 building and construction company, suggesting that by changing the way landlords purchase repairs materials (say, through a supplier like Travis Perkins…) said landlords could get a better deal? What a coincidence! I’m not blind to the obvious commercial advantages being sought by Travis Perkins Group commissioning such a report…but nor will I allow cynicism to blind me to the very real issues faced by social housing asset management.

Material Advantage begins by stating:

“Social housing providers in Great Britain are under continued pressure to do more with less, and deliver year-on-year efficiencies”

This much is true, and as more houses are built, whether steadily over time or in great bursts to stem the housing supply shortages such as we are seeing presently, this pressure is only going to increase. We don’t want to invest our energies into building swathes of new properties with no plan to effectively and efficiently repair and maintain them over time – that kind of short-term thinking has led us to face many of the problems social landlords face with current housing stock (Large Panel System building, anyone?)

If social housing is to gain traction as highly-desirable tenure, then the physical standards of social housing must be similarly high. By taking repairs and asset management seriously we increase the financial and social value of social rented stock, and ensure that the systems we have in place don’t just provide for social housing now, but continue to provide for it over time as they transform from houses into homes.

Perhaps the more social landlords can save on R&M the more they can invest in building new social rented housing? Now that really would be getting more brick for your buck.

References

  • Material Advantage: A study of the cost of materials supply inefficiency in social housing repairs and maintenance in Great Britain, Travis Perkins Group Managed Services and MindMetre Research, July 2014
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