The water companies regulated by Ofwat are currently operating within AMP8, the latest Asset Management Period covering investment and performance commitments from 2025 to 2030. As AMP8 delivery progresses, water companies face increasing pressure to deliver enhanced infrastructure improvements with improved customer outcomes and sustainability performance while achieving value for money.
Investment and innovation remain central to AMP8 success, but there is one factor that plays an especially critical role in delivery: supply chain resilience.
The challenge is not simply securing suppliers, but building supply chains that can manage changing market conditions and respond effectively to the resource pressures faced during AMP8. Water industry companies that strengthen their procurement strategies and proactively manage risk will be better positioned to achieve their AMP8 objectives.
Why supply chain risk matters during AMP8
AMP8 represents a significant period of investment and transformation for the water industry. Water companies are now expected to deliver a much larger and more complex investment programme than in previous periods, with increased performance expectations from regulators.
Delivering these commitments depends heavily on the strength and capability of the wider supply chain. And supply chains are already under pressure. The water industry continues to face several supply chain challenges, including:
- High demand for suppliers leading to limited availability of specialist skills and resources
- Supplier delays or failure due to geopolitical and climate-related disruptions
- Rising costs for materials, energy and transport
- Material availability challenges
- Long manufacturing and delivery times for essential equipment
- Increasingly stringent ESG expectations
These challenges mean supply chain risk management has become a strategic priority rather than simply an operational consideration. Water companies need suppliers that can deliver consistently and continue to adapt as AMP8 requirements evolve.
How to reduce supply chain risk during AMP8
Effective supply chain risk management is essential to delivering successful AMP8 projects, and this means taking a proactive approach to procurement and supplier relationships. The following strategies can help water companies reduce supply chain disruption and avoid costly delays.
1) Create a commercial model that attracts suppliers
As AMP8 delivery gathers pace, water companies are competing for the same specialist contractors and skilled workers as the energy, transport and wider infrastructure sectors. Skills shortages means suppliers are increasingly selective about the sectors and organisations they work with. Procurement strategies that focus primarily on cost are less likely to secure the capacity and expertise needed to deliver complex programmes.
Instead, water companies should adopt commercial models that create value for both parties. These should include:
- Clear performance expectations
- Shared objectives
- Realistic delivery programmes
- Fair risk allocation
- Transparent payment terms
- Incentives linked to outcomes
Creating a commercial environment that suppliers want to work in means organisations are better placed to secure the resources they need and reduce the risk of delays throughout AMP8.
2) Align KPIs with AMP8 outcomes
The success of AMP8 will be measured by far more than whether projects are delivered on time and within budget. Water companies are also expected to improve environmental performance and deliver measurably better outcomes for customers. Procurement and supplier performance measures during AMP8 should reflect these wider objectives.
Alongside traditional measures of cost and programme performance, organisations should monitor indicators such as quality, health and safety, carbon reduction, innovation, social value and collaboration. Determining clear KPIs and aligning these across clients, contractors and suppliers ensures everyone is working towards the same goals and provides suppliers with greater certainty.
This approach also helps organisations monitor their progress more effectively, as well as encouraging greater transparency and accountability across the supply chain.
3) Adopt a collaborative approach to risk management
The complexity of AMP8 means water companies are increasingly relying on suppliers to help deliver innovative solutions, whether that’s through new technologies or more efficient ways of working. But in today’s market, suppliers are less willing to absorb the commercial risk associated with innovation and solution development. Strong demand across the infrastructure sector means suppliers can choose to work with organisations that share risk more fairly.
Instead of pushing risks onto suppliers through onerous contract terms, water companies should adopt a collaborative approach to risk management. This means identifying risks early and working together with suppliers to develop mitigation strategies before delivery is impacted.
Open and transparent communication with suppliers is key here, as is conducting regular risk reviews.
A collaborative approach can improve supplier confidence and allows both parties to respond more effectively to challenges.
4) Build long-term supply chain partnerships
With the scale of investment being delivered during AMP8, developing strong supplier relationships has become increasingly important. Long-term partnerships provide greater stability than transactional procurement and enable both water companies and suppliers to plan with greater confidence.
For suppliers, longer-term agreements justify investment in expanding their manufacturing capacity, whether through additional staff or technology upgrades. For water companies, they provide greater certainty over resource availability. Building these relationships requires:
- Engaging suppliers early
- Maintaining regular communication
- Sharing forward pipelines of work
- Involving key suppliers in planning and decision-making
- Creating an open, collaborative environment that helps build trust
Where organisations need support in this area, investing in procurement managed services can help establish the frameworks and governance needed to build successful long-term supplier partnerships.
5) Improve supplier evaluation processes
Supply chain resilience begins long before contracts are awarded. A comprehensive supplier evaluation process helps organisations identify partners that have the capability and resilience to support successful AMP8 delivery.
Alongside technical capability and cost, procurement teams should assess financial stability, previous performance, quality management, resource availability, cybersecurity practices and environmental credentials. Regular performance reviews should continue throughout the contract; these allow organisations to identify emerging risks and work with suppliers to resolve issues before they affect project delivery.
A robust supplier evaluation process helps organisations identify suppliers capable of supporting AMP8 objectives over the long term.
6) Embed sustainability into procurement
Sustainability is now a core consideration in procurement decisions across the water sector. AMP8 requires water companies to reduce carbon emissions, improve environmental outcomes and create greater social value through their supply chains.
Embedding sustainability into procurement means evaluating suppliers against environmental, social and governance (ESG) criteria as well as commercial performance. This may include assessing suppliers’ carbon reduction plans, greenhouse gas emissions (including relevant Scope 3 emissions), ethical sourcing and waste management practices.
Integrating sustainability into supplier selection and contract management not only supports regulatory commitments but also helps build more resilient supply chains that are better prepared for future legislative requirements.
7) Develop a strong procurement team
Procurement teams are increasingly crucial in the successful delivery of AMP8, far beyond sourcing goods and services. The credibility of an organisation is dependent on the people within it. Organisations that invest in procurement capability development are often better placed to build stronger supplier relationships and deliver a more strategic procurement approach to AMP8.
Procurement professionals should have expertise in commercial strategy, contract management, supplier relationship management, risk assessment and data analysis, as well as an understanding of the regulatory and environmental priorities shaping AMP8.
Barkers are specialists in the utility sector. With decades of experience supporting the water industry, our senior managing consultants can help your organisation effectively meet the challenges of AMP8 and beyond. Contact our team today to find out how we can transform your procurement strategies and support your AMP8 ambitions.