Case Study for Supply Chain Resilience - Food Contracts

The Education Authority’s (EA) Commercial Procurement Services (CPS) established several food contracts with annual values of £20m. These are required to ensure that the EA meets their statutory requirement to provide free school meals to all eligible pupils across NI. The EA’s Catering Service produce circa 145,000 meals daily to children within nursery, primary, special, and post-primary schools. These food contracts assist EA’s Catering Service to deliver school meals that meet Government Buying Standard for food and catering services and Nutritional standards for school lunches guidance.

To ensure continuity of catering services CPS and EA’s Catering Service have adopted a collaborative approach to contract management with their strategic food suppliers. This collaborative approach was chosen due to the potential threats to food security and volatile pricing. The recent pandemic, coupled with geopolitical risks such as the impact from the Ukraine-Russia conflict and Red Sea crisis has highlighted the fragile nature of supply chains in a global demand market. Early warning of supply chain shocks, coupled with the understanding of how these shocks can impact the supply chain are a vital means of mitigating against the ensuing risks. Developing ways to quickly substitute products when issues arise and working more closely with suppliers to proactively manage the associated risks are important steps that EA has taken.

EA currently have several contracts with Henderson Food Services Limited (HFSL) who supply to over 590 Kitchens across NI with circa 600 product lines. The impact of the pandemic, Brexit and global geopolitical factors highlighted the increasing complexity of the global food supply chain and indeed other factors which challenged security of supply of products to schools for example food inflation, labour shortages and inventory depletion.

Continuity of supply is an essential objective for these contracts as it allows school kitchens to remain open and fully functional to deliver school lunches to children and young people. EA’s key objectives for these contracts were to maximise supply chain efficiencies and reduce risk throughout the supply chain by providing greater transparency on supply chains and visibility of potential threats to food security.

EA’s contractors conducted supply chain mapping exercises to determine the length of our supply chains for these products in order to manage supply chain disruption, determine risks and build resilient supply chains. This allowed EA to plan the response to any identified risks.

Actions undertaken with HFSL to ensure risks were appropriately managed included: -

• Triaging EA’s key products to allow for range rationalisation to free up warehouse space for key product lines and securing additional warehouse and freezer space to hold contingency stocks of same.
• Dual sourcing of products –to have back up supply lines in place should existing suppliers fail to deliver.
• Supplier working closely with their buying Group, to source new supply partners that were vetted and approved by their Compliance team to provide products as required.
• Contractor trading staff increased the frequency of meetings with their key suppliers and, coached GB suppliers on Brexit/ Windsor arrangement to ensure suppliers were compliant with regulations and assessing the likely impact on lead times and took decisive action by re-routing supply via EU to mitigate the impact/ challenges of getting stock.
• Collaborative approach in identifying key lines and agreeing substitute list in advance of any supply issues arising and seeking alternative own-branded products to assist EA in managing budgets.
• Initial weekly meetings with stakeholders which reverted to monthly as the process embedded with daily communications to provide updates on the market conditions and ensure that actions being taken were having the required impact.

Premarket engagement exercise at retendering stage of these food contracts considered supplier capacity and security of supply to allow suppliers with industry knowledge to raise risks and issues that would need to be managed within the new food contracts, for example the volatility of food pricing over the last number of years, feedback was sought on any potential fixed price period for future contracts, pricing review clauses and indexations. PME sought to understand risks for suppliers in ensuring continuity of supply of the products and sought the appropriate allocation of risk in our sourcing strategy without passing unnecessary risk to suppliers that would be reflected in the supplier price.

To ensure compliance with PPN 05/21 Human Rights HFSL provided their human rights policy and EA engaged with the supplier to understand their vendor compliance and human rights due diligence process. HFSL sourced an expert third-party consultancy, to train key staff in Modern Slavery and human rights and to support the business in mapping risk assessment and developing mitigation responses. Their consultant provided support in mapping HFSL supply chains assessing industry and geographical risk, helping them understand where the biggest risks lie and where to steer actions to have a positive impact, challenging suppliers for the betterment of workers. HSFL stated that this process provides them due diligence on supply chain, better visibility and helps educate and train their suppliers in this regard. 

Developing and managing constructive and transparent relationships with our suppliers ensured that food contracts were successfully executed with minimal disruptions, maximising value for money through improving supplier performance and lowering costs. This collaborative approach increased CPS commercial knowledge and experience of the market to manage potential supply disruption, identifying lessons learned which can then be used to inform future contract terms or strategies. This also offered level of transparency on our supply chains to understand country of origins for our products and any potential Human Right risks.

The measures built into the contract for ensuring supply chains are ethical contribute to the NI Executive’s draft programme of government for a sustainable future, protects the human rights of individuals, provides job opportunities, and brings families out of poverty.  By providing decent work and demanding Suppliers do the same, organisations invest in the future of communities.