Safety Is The New Black For Procurement
The COVID-19 pandemic has brought a new focus to safety for every business – not just those like airlines and resources that “always put safety number 1.” As one CPO recently said, “we are all safety buyers now.” Jonathan Dutton explains for Supply Clusters members…
We are all buyers of the safety category now. Navigating virus risks and corporate liabilities alike. All service suppliers and most suppliers of goods will have to comply with a raft of new safety protocols in future as a direct consequence of the COVID-19 pandemic. These are set to become a new prerequisite for doing any business and are likely to become more onerous, specific and intricate in future as we wriggle out of the pandemic. A new cost of being in business for all of us.
Corporate safety – from viruses
Indeed, many corporates are now taking a hyper-sensitive approach to keeping staff, customers and stakeholders safe. And not just from office trip-hazards or industrial accidents – but from the unseen COVID-19 virus.
There is now a question that workers proven to have caught COVID-19 at work are probably covered under WorkSafe protections? As may be colleagues. But what about families at home, are they likely not covered? If not, is the firm liable? What of one office worker infects five other office workers. And each worker infects their family at home. Pretty quickly that is over 20 people with COVID-19 – do they have a claim on the company too? What if those 20 infect 20 more?
This sort of thinking is driving HR managers to worry even more than usual. How to minimise workplace infections? How to stop the spread? How to forge a risk plan that manages such outcomes? How to prevent the whole problem in the first place?
Their first step is to keep people out of the office, working from home (WFH) for longer. And for some people, forever. And minimise or stagger time in the office for the rest. Next, corporate travel is banned, or heavily restricted for all but the strongest business cases. Likewise, visitors to our offices. No external meetings on site, no suppliers on site, nobody but staff really – and those 4m² apart, preferably, not just the regular 1.5m distancing.
And, finally, our staff cannot leave the site to meet people, even for coffee, during work hours. They may bring the lurgey back in. Seriously. More than one person has recently cited such a rule during work hours.
So, managing the safety of all stakeholders means managing suppliers bringing goods and services into our workplace. Procurement’s job, surely? See to that will you …
NDA’s – but for Safety
Just like we have forged separate NDA’s (non-disclosure agreements) with vendors in the past, we are likely to make something like SSA’s (safety standard agreements) with vendors in future – even BEFORE they ever supply us anything at all. A new prerequisite for supplier qualification, before even the prospect of on-boarding.
Indeed, safety is set to become the paramount form of sustainable procurement. Safety first. Always. This has been the culture in some industries already – like airlines and resources companies. Now, we will all define our own safety culture. Each industry will agree their safety rules and specifics. Procurement will have to be across them all. With no prizes for slip ups!
A PASA Webinar with HSE Global
The recent free PASA Connect run webinar “How to buy safety … today and tomorrow” outlined key considerations for busy buyers suddenly tasked with buying safety professionally and was presented by international specialist safety consultancy firm HSE Global, headquartered in Sydney.
In many ways, the last six months (March-Sept 2020) have seen much accelerated evolution in many fields including safety. A cashless society – achieved within 60 days really. The abolition of handshake greetings – a tradition hundreds if not thousands of years old. The start of the paperless office – at home, no less. The birth of a ‘Safety First’ culture for everyone is now.
This recent PASA webinar fused existing safety trends with virus safety measures and set them into a supply side context. The recording and slides are free to download from PASA
Data from 2018 showed around 6,000 workplace fatalities per day worldwide, with 144 in Australia. Some 62% of these fatalities occurred where work was outsourced to suppliers or contractors. Perhaps a number maximised as new people “didn’t know the ropes” when working in an outsourced role?
Obviously, these numbers are likely to increase due to the virus from 2020 onwards – especially in the most vulnerable sectors like Aged Care. Indeed, towards uncertain numbers.
Keeping staff, suppliers and the public safe will be paramount for everyone in future – not just safety leaders. And procurement will be expected to play a full and thorough part – and keep the supply side (at least) in check entirely – and from all forms of risk that is.
The three P’s safety strategy
In the supply side context, the three P’s of ‘People, Product and Process’ can provide a framework to forge a safety strategy within. These levers can help buyers manage supply side safety.
Working with suppliers (and their suppliers too) to agree new process, minimise people exposure and secure low-contact products. Amending agreements, driving new SLAs (service level agreements) and redesigning delivery. All set to newly defined standards and measured with new KPIs.
Like HR, the goal is to minimise risk being brought into the business.
Suppliers can undermine safety standards
Yet, suppliers can undermine safety standards – even unwittingly:
The Deepwater Horizon oil platform case study from 2010 taught an industry how to re look at safety standards – especially on the supply side. It taught stakeholders about consequences. Covid-19 has done the same for everyone, and on a truly global scale.
BP leased the DH oil platform from Transocean, who had 7 years without a major accident and had won numerous safety awards. Their supplier contracted to install the new concrete core, on which the cause of the disaster was blamed, allegedly had a poor safety record, and 11 fatalities and the worst oil spill in US history resulted.
The Grenfell Tower fire in west London is another case study of suppliers bringing vulnerability. The local council, The Royal Borough of Kensington & Chelsea (RBKC), commissioned the tower block from awarding winning architects. Yet their suppliers used flammable materials as cladding to the tower exterior. The fire caused 72 fatalities and has cost tens of millions of pounds.
“Trust, buy verify” Ronald Reagan
Safety leadership by buyers
The lessons of these case studies, and many others, is that safety leadership is required, from the top – that is, from the buyer. This sets the supply chain safety standards, influences the supply chain safety culture and protects all stakeholders in that supply chain. In other words, buyers have to do three things to show safety leadership:
Ask better questions – up front
Change evaluation & performance criteria of suppliers
Assure, not just assess, safety standards
Numerous safety techniques are available. Popular ones include:
Evaluate weighting increase on tenders and appraisals of supplier capability
Using a Red flag system for recognised risks
Rating critical risks in a ‘traffic light’ system – red/amber/green
Developing your own minimum safety standards criteria
Using standards in practice as ready benchmarks
Safety training all supply chain personnel – appointing safety supervisors
The global safety standard is largely accepted as ISO45001 – the ISO global standard in occupational health and safety (OH&S). These standards can relatively easily be applied to a supply side context and non-employees and structured to minimise risk into the client business.
The key to using standards is to assure them rather than just referring to them or even assessing them in practice. This needs a method or process to achieve. Beyond demanding suppliers comply and contracting for that, even specifying safety standards.
Certainly, contract managers need to include safety as a core measure. Both Transocean and the RBKC could have benefited from such an approach.
Today leading resources companies like BHP Billiton, Alcoa, Chevron, Rio Tinto, Thiess, Anglo American and others have become widely recognised for embracing safety as a number one priority and excelling in this area. Yet most of these firms share in common a history of safety incidents. Even leaders are not exempt from accidents or safety incidents.
What is important, is that these companies learnt from their experience. And embraced safety even more. They implemented change in response and targeted culture change from such experiences, not just adjustment of supplier KPIs. They focussed on critical risk assessment and building an assurance process. They asked better questions.
Today organisations like Ausgrid, Wollongong Council, Broadspectrum, Northpower and seqwater are gaining a good reputation for safety leadership in ways relevant to their business operations and evidenced by improving YoY safety numbers.
Procurement’s role in safety
PROCUREMENT have a key role in safety moving forward – they can add value to the business and interactions with your business safer for all.
Safety work starts early with shaping culture, adopting standards, building frameworks, setting process and agreeing measures. And even before vendors become suppliers, the pre-qualification process should include safety as a core requirement. Up front is a good place to manage risk.
This approach can be cemented in the supplier selection process through tender scoring, weighting, tender policy and template SLA agreements.
Alas, KPIs on safety are not commonly available. There is no www.safetyKPI.com – yet, google can still yield support for KPI development and case studies and examples of good KPI practice. Start with DIFOT (delivery in full on time) KPIs and work through their dependencies and the safety implications. Industry associations are also at work to define relevant metrics for their discipline. An increasing number offer benchmarks on performance including safety questions. Examples include water associations and the NSW NSW Minerals council.
The contract management process can take over after contract-signature with safety the first priority. Thus, embedding safety into the procurement life-cycle process is entirely achievable.
Of course, accidents can still happen (construction sites), product can still be faulty (the Boeing 737-Max aircraft), poor upkeep can maim (DreamWorld), or viruses can still enter the building (Legionnaires Disease). But chance of these can be minimised through proactive safety planning and steps like those suggested above. Yet, truly, it is the forging of safety culture, with everyone pulling together to reduce risk, that makes the real difference over time – both internally and down your supply chain.
Building a safety framework
Building a safety framework for the supply side quickly, can usefully include consultants (like HSE Global of course), developing in-house capability, focussed change management approaches, strong communications, clear safety training and inspiring leadership. Culture change can take a little longer.
Underpinning any such strategy is still risk management. Ultimately safety is a risk. A virus is an example of a biological hazard – the extent to which it is a critical risk to your business has to be assessed? And catered for appropriately in your plan, in just the same way as other risks (falling from heights, asbestos, counterfeit parts) with both internal and external perspectives.
Any good safety framework defines risks, weights them, and puts in place appropriate resources and efforts to prevent them or mitigate them such as use of PPE, new workflows, revised process, better layouts, firm rules, training, revised policy, response plans and the like. These are so much more effective within an environment tuned to identify and manage risks in real-time.
Yet the corporate culture around risk can also be heavily shaped by the business leader’s attitude to risk and the C suite risk appetite. Maybe procurement has a role in influencing this from the supply side – articulating and costing potential risks, some unseen until now.
As virus prevention forms a central condition for the return to work, so procurement is set to play a crucial role in managing supply side input to build safety for all stakeholders to a point that enables the business to operate.
This will mean building on any existing safety protocols and standards to encapsulate virus management, as well as building a culture of safety throughout the supply chain that feeds your business. And specifically including safety in agreements in a more comprehensive way.
Perhaps the COVID-19 virus has even done business a favour in the long run, by ensuring that everyone now pulls together in the cause of safety, forging teamwork across corporate boundaries and building a culture of safety the length of the supply chain and not just internally.
Yet the virus is a risk and, like any other business risk, has to be weighted and managed. Definition, identification, mitigation – driven by proactive planning and enveloped by a new culture of obedient stakeholder response.
Business wise, the cost of disruption from risk is usually high in time, money and effort and can be long lasting (bottlenecks and latent liabilities) – not to mention likelihoods of injuries and fatalities. It can also be catastrophic in some cases – like the reputational brand damage at DreamWorld in Queensland following the water-ride failure in 2016 which resulted in four fatalities and closed the park for an extended period and will inhibit visitor numbers for possibly years to come.
Post virus, procurement now has a central role to minimise risk entering the business – or their supply chain. Safety has to be elevated as the central part of RISK in any balance of cost-risk-policy aims when sourcing supply lines.
This demands a revised SAFETY FIRST approach with more focus on proactivity and rigour – starting with the THREE key steps which will qualify us to become Safety Category Managers:
Ask better questions – up front
Change evaluation & performance criteria of suppliers
Assure, not just assess, safety standards