Project Title: Supply Chain Management, Interim Commercial Manager ARN (Arriva Rail Northern), Customer Experience Centre

Background

In August 2018, AMDS Consultants Ltd were engaged to provide project management resource to realise the introduction of an enhanced rail passenger compensation scheme (see: Introduction of Improved Passenger Compensation, Arriva Rail Northern).

The introduction of the new scheme was a franchise change and consequently paid for by the DfT (Department for Transport). As part of the financial renumeration two new permanent members of staff would be recruited by ARN to service the compensation scheme which required both supply chain management and extensive performance reporting to ensure the scheme was financially neutral for the franchisee.

With the early introduction of the new compensation scheme and the agreed period of conversion to business as usual recruitment of the new staff occurred after the scheme became operational. To ensure ARN met its obligations to DfT under the negotiated settlement AMDS Consultants Ltd were asked to provide interim commercial management of the newly introduced scheme.

Work Completed

In the role of interim commercial manager, the AMDS Consultants Ltd consultant was required to address three principle areas:

1. Establish and agree monthly and quarterly reporting structures which complied with the negotiated settlement between DfT and ARN
2. Negotiate the most appropriate commercial arrangements with the principle supplier providing for the increased demand and offering ARN improved flexibility
3. Prepare and deliver the handover of responsibilities to the newly appointed commercial manager and performance analyst once both had been recruited.

Much of the work on monthly and quarterly reports was initiated in parallel with the conversion to business as usual of the enhanced compensation scheme and focused particularly on identifying trends and reviewing the validity of estimates in the original settlement.

Of more significance was the negotiation of the revised commercial terms with the principle supplier. In particular much emphasis was placed on the data integrity and information security arrangements linked to passenger claims and the means by which the cost per claim could be progressively reduced by realising operational efficiencies. Ultimately, a flexible 2-year contract with two further optional 12-month extensions was negotiated and agreed. The arrangements offered ARN the flexibility to in-source specific components, improve supplier performance through targeted key performance indicators and encourage the supplier to work collaboratively with ARN to constantly improve the passenger compensation process experience.

Handover was successfully achieved enabling organisational learning and ensuring the franchisee had the resource flexibility and commercial resilience to ensure the introduced scheme remained viable whilst contributing to improved passenger satisfaction as measured independently through numerous survey structures.

Issues Addressed

Although the complexity of the reporting structures in the negotiated settlement with the DfT was onerous the actual detailed data was relatively simple to collate and curate.

The major issue to be addressed was the commercial arrangements with the principle supplier which had been negotiated in a time-pressured environment after the collapse into bankruptcy of the previous provider. There was an urgent need to put these arrangements on a more robust foundation with greater flexibility for both parties and a clear set of performance metrics.

As more detail around the original arrangements was exposed it became clear that an entirely new contract needed to be negotiated. To this end our consultant was required to work closely with Arriva Group commercial and legal functions as well as ensuring the supplier continue to provide support while being asked to take on more stringent key performance indicators.

Outcomes Achieved

The engagement realised the following benefits for ARN:

• Structures and processes were put in place to ensure compliance with the requirements of the negotiated settlement with DfT
• Additional benefits were drawn from trend analysis and financial review of the curated data
• A new set of commercial terms was negotiated with the principle supplier
• The new permanent staff had been aided up the learning curve, were able to take over the supplier management and data analysis as well as being in a strong position to improve operational efficiency and passenger satisfaction.

Client Assessment

The Arriva Group legal commercial and financial teams who worked closely with our consultant remarked on their commitment to finding a flexible solution that met Group needs for a robust, flexible and performance related arrangement which was a significant improvement on the previously agreed terms of business.

The local client observed that our consultant had achieved major progress which meant the team could go forward confidently and realise significant improvements in the information provided to operations for decision making whilst given them greater control over supplier management and performance.