Yorkshire Purchasing Organisation (YPO) – branching out into the private sector, by ‘eck*

On my recent trip through England - London to Durham via Stevenage, Lincoln, Harrogate, and Knaresborough - I managed to fit in an enjoyable catch-up with Paul Smith, the Procurement and Supply Chain Director of YPO (the Yorkshire Purchasing Organisation). YPO is the largest supplier to the education sector, providing everything from access to frameworks in sectors such as Energy, to directly delivered goods – stationery to sports equipment, IT equipment to medical supplies. A recent major growth area has been around catering (equipment, food and supplies), with schools now being directed as of this term to provide free school meals to the under-sevens.

The timing of our meeting was excellent, because YPO had made a significant announcement just a day or two before. For the first time, the organisation is selling to private sector clients as well as their existing public sector client base.

YPO is owned by 13 local authorities, and a further 31 authorities are "associate members” that participate in an element of profit sharing. Another element of profit sharing is the money returned to all their clients, £2.1 million in total last year - "Wakefield College got £1400 back the other day" as Smith explains. That’s 25% of the profit, with a further 25% going to the associates and 50% to the founder members.

But it was only with the advent of the Localism Act in 2011 that local authorities got more freedom to trade, resulting in YPO considering their strategy then setting up a new company to execute that private sector business. That company is owned again by the founder local authorities that  have put in a small amount of seed capital to kick things off.

"The immediate opportunity is private nurseries in particular, as well as private schools that aren't charities, and some private health organisations. That fits well with our core public sector business, as education is our largest sector by some distance. But there are opportunities in the export market, and with private catering firms for instance as well."

However, the intent is to grow organically - "we're not investing huge amounts of marketing money here." The plan is to look to grow a turnover of a few million for the new business over the next couple of years, so it will be small compared to the almost £500 million revenue in the core business, but the long-term potential is obviously much larger. So anyone can now use the YPO website, by registering, then choosing from the products there, and paying by credit card. I’m going to try it myself ...

In terms of the core business, progress is good. Revenues have grown over 50% over the past three years, and there was a victory to celebrate in the “Best Public Procurement Project” category at the recent CIPS SM Awards, for their work in collaboration with Crown Commercial Service (CCS), ESPO and NEPO (on behalf of Pro5) on insurance procurement. "We're working well with CCS in a number of category areas," says Smith, and there seems to be a genuinely positive attitude there.

Coming back to the new business, there is a read-across perhaps to the US. There, a number of group buying organisations have become pretty large and successful by serving a community of small to mid-tier private sector firms, and leveraging volume and expertise to buy on their behalf -- look at Corporate United for instance. It’s not a full-service Proxima, Xchanging or Accenture outsourced procurement service, but it obviously has a place in the market in the US -- but up to now that model has not really taken off in the UK. So perhaps over time YPO can emulate that success?

* As I come from even further north than Yorkshire, I am technically allowed to stereotype ... Why man, where a'm from, Yorkshire was the deep south, like ...

Voices (2)

  1. sad face:

    Great, so a business set up with public money and back stopped by the council will now compete with private business. Sounds fair to me…not! Look out private business in this end of the market, the government is about to crush you and you business….

  2. Paul Smith:

    Hi Peter – A small correction (my mistake), Wakefield College received £4,500 in their profit share – the news article is here – http://www.ypo.co.uk/news-and-events/news/share-of-profits
    Paul

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