The UK Experience by Malcolm Morley*
Private and public sector organisations have always faced the pressures of achieving large volumes and standardisation for economy of scale, as against the diseconomies of small volumes from differentiation to meet local needs.
It is the supermarket versus corner shop scenario.
Supermarkets have been able to aggregate huge volumes and consequently drive reductions in unit costs through their purchasing power. They’ve even been able to reduce their costs by getting their customers to select the products that they want from the shelves!
Corner shops, by contrast, without the ability to aggregate their purchasing power, have had to compete differently.
They have had to provide convenience, a limited range of products tailored to their local markets, and customer service at a higher cost than supermarkets.
The supermarket format has prevailed and corner shops have seen a huge reduction in their numbers as people have voted with their feet.
While there are, of course, differences between a retail offer and council services, there are lessons to learn.
These lessons include that the public is mostly content with a standardised offer of products and services; that it is prepared to help itself to get what it wants, and that it prefers lower cost and certainty of provision/quality to a locally differentiated, less predictable, higher cost alternative.
The question is, how should councils respond?
In responding to fiscal challenges, councils have cut the service portfolio or salami sliced services (small changes that go undetected) to reduce costs.
A more sophisticated approach is going to be required.
Councils increasingly will need to be supermarkets for service provision and corner shops as community leaders.
To achieve this, they will have to work together to agree on a ‘core’ service offering that is standardised and capable of being aggregated for procurement.
They will also have to involve their customers in the development of this standardised offering.
This doesn’t mean that local priorities, the essence of Local Government, will not be identified and met as part of an efficient ‘non core’ service.
It does mean, however, that the core service portfolio will be standardised and costs significantly reduced.
In standardising services, there must be a means by which aggregated volumes of services can be procured from a range of suppliers to ensure competitive provision.
In some service areas, however, the supplier market is currently immature and this perhaps offers an opportunity for some councils to set up trading companies to compete for service provision.
Deciding what is core and non core service provision needs to be part of the current debate.
What is clear is that councils trying to go it alone as a corner shop service provider will increasingly find it difficult to deliver the performance required within the resource envelope available.
In seeking scale for service provision procurement, it is essential that the need to be small enough to be community focused for community leadership and Local Government is not prejudiced. Local Government needs to mean local.
Can your council respond to the supermarket and corner shop challenge?
*Malcolm Morley is Chief Executive of Harlow District Council and can be contacted via the Editor, email info@lgfocus.com.au The views expressed in
this article are not necessarily those of
his employer.
