REPORTAGENDA ITEM No. −−3−− · 2016-04-21 · NORTH LANARKSHIRE COUNCIL REPORTAGENDA ITEM No. −−3−− To: HOUSING & SOCIAL WORK SERVICES COMMITTEE Subject: NORTH LANARKSHIRE

NORTH LANARKSHIRE COUNCIL

REPORTAGENDA ITEM No. −−3−−

To: HOUSING & SOCIAL WORK SERVICESCOMMITTEE

Subject: NORTH LANARKSHIRE INDUSTRIESBUSINESS PLAN 2016−2021

From: HEAD OF BUSINESS HOUSINGPROPERTY

Date: 28 APRIL 2016 Ref: DM/AF/1 5055

1. Purpose of Report I Introduction

The purpose of this report is to seek approval from committee for the fully updated NorthLanarkshire Industries (NLI) 5 Year Business Plan in line with agreed developments.

2. Background

2.1. Housing and Social Work Services committee previously approved the NLI BusinessPlan 2015−2020, on the 23 April 2015.

2.2. In line with developments during 2015/16, a fully updated business plan has beenprepared incorporating the newly re−profiled work streams and associated income.This highlights the projected income, expenditure and projected surplus/deficit(subsidy) levels for the next 5 year business planning cycle against the 2015/16projected outturn baseline.

3. Proposals I Considerations

3.1. The business plan incorporates an updated income and expenditure forecast by workstream over the next 5 years, highlighting the required annual council fundingcontribution.

3.2. Each workstream is an accurate reflection of projected income and expenditure,income targets, based on detailed spend analysis over the past 3 years coupled withdiscussions with relevant services.

3.3. The proposed 2016/17 − 2020/21 Business Plan for NLI is detailed in Appendix 2 forconsideration.

3.4. Research confirms that the cost of supporting disabled persons within the communityis calculated at an average of £31,000 per annum (source: Institute of Fiscal Studies2012, briefing note BN13), this is comparable to the council 2016/17 projectedcontribution of £10,803 per NLI disabled employee (based on 30 disabledemployees).

2

4. Summary of Financial Position

4.1. The Council approved its General Fund Revenue Budget on 4 February 2016, ofwhich £324,091 represents the approved revenue contribution to NLI incorporatedwithin the NLI business plan 2016−2021.

4.2. The 2016/17 gross budget of £2,077,401 is partially offset by a budgeted incometarget of £1,753,310, leaving a required NLC funding contribution of £324,091. Theincreased Council funding contribution recognises the estimated employee andenergy cost pressures built into the Council's ten year financial plan.

4.3. Over the 5 year cycle from 2016−2021 the total NLC funding contribution equates to£2,004,211.

4.4. The business plan and anticipated Council funding contribution will continue to beupdated on an annual basis to reflect changes regarding the Council's future financialoutlook.

5. Financial Concurrence

Prepared in accordance with the Scheme of Financial Delegation, the financial informationcontained within this report has been agreed with the Head of Financial Services followingassessment and due diligence by service−based finance personnel.

6. Recommendations

It is recommended that the Committee:

(I) Note that NLI based upon projected income and expenditure assumptions is currentlyprojected to deliver an additional operating deficit of £2,004,211 over the next fiveyears: and

(ii) Approve the next phase NLI Business Plan and the objectives and targets detailedwithin, an update of which will be detailed to members in 2016/17 for full review.

Des MurrayHead of Business Housing Property12 April 2016

For further information about this report please contact Aileen Nakhaei, Service Manager Finance ontel: 01698 332788

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North Lanarkshire Council

NI INDUSTRIES *bSUPPDTINGBDS1NE..SS\.*'

BUSINESS PLANUPDATE

2016/17 − 2020/21

1

Contents

Executive Summary . 2

Section1: Introduction ..........................................................................................................3

Section 2: Business Aims and Objectives .............................................................................4

Section3: Workforce Planning ..............................................................................................5

Section 4: Products and Services .........................................................................................9

Section 5: Marketing Strategies and Growth .......................................................................12

Section 6: Financial Forecasts ............................................................................................17

2

Executive Summary

North Lanarkshire Industries (NLI) is a supported employment facility that manufactures andprovides a varied range of products and services including soft furnishings, sofa's, beds,bedding, removal and storage, homecare uniforms and fire protection maintenance to NorthLanarkshire Council, its partners and a range of external customers.

The NLI customer base consists of both public sector organisations as well as private sectororganisations. These markets incorporate strategic partners such as Local Government,Public Sector Bodies, NHS Scotland, Scottish Prison Service, Care Homes and Retail. ThisBusiness Plan aims to define the strategic objectives of NLI over the next 5 year period2016— 2021, as well outlining our commitment for business growth, employment and trainingopportunities for people with disabilities, quality, and best value and securing a long term,sustainable future for NLI.

The current workforce consists of 41 employees divided between 30 direct manualoperatives and 11 indirect staff. There are 30 people registered as having a disability, 26male and 4 female. Of these 30 employees, 28 are supported through the Department ofWorks and Pensions (DWP) Work Choice Programme. This employability initiative istargeted at supporting individuals with disabilities into supported employment with a furtheraim of progressing towards unsupported employment.. NLI has received DWP confirmationwith regards to extended Work Choice Protected Place funding until April 2017, at whichpoint it will be further reviewed and the impact upon NLI assessed and incorporated withinongoing Business Planning activity.

Long term sustainment into unsupported employment presents a significant challenge to theGovernment and their prime providers. NLI currently face an ambitious progression target,however, the business is currently on course to achieve Work Choice year progressiontargets.

NLI is a service provider that believes strongly in the benefits of Lifelong Learning.

Focus on ability, not disability, renewing our employee's self−worth creating a developmentpathway for all their futures and a strong successful business with long term employmentopportunities. In 2015 NLI were awarded the NLC Lifelong Learning Award recognising theirachievement and commitment in this area. Creating an ongoing tailored learningenvironment enables career progression and promotes life skills through enhancedemployability and social inclusion.

Article 19 of the latest Public Sector Procurement Directive, 31 January 2006, and theforthcoming launch of Article 20 allows contracts to be reserved exclusively for supportedbusinesses. For NLI it is critical that this legislation is strongly supported by the Council, itspartners and the wider sector to ensure all opportunities to utilise the products and servicesof NLI are maximised.

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Section 1: Introduction

Background

NLI is a supported business established by North Lanarkshire Council, it is a leadingexample of both commercial success and social responsibility.

The success of the business, which supports and employs disabled persons, is due to thestrong culture of employee engagement, with open communication and active businessdevelopment − led by the employees, the key drivers in shaping its nature and focus. It isnot a place disabled persons come to work; it is a place they come to contribute anddevelop.

Focus on ability, not disability, has renewed our employee's self−worth creating adevelopment pathway for all their futures and a strong successful business. NLI has a keyrole to play in supporting the Councils Community Plan / Single Outcome Agreement(2013−18)

in areas such as tackling inequality.

Following the completion of a successful first 2 years, NLI has progressed into a fullyestablished force in furnishing production, up−cycling, refurbishment and maintenance.

The NLI supported employment facility provides a wide range of products and servicesincluding sofas, re−upholstery, soft furnishing up−cycling, removal and storage, bed supply Imanufacture and fire extinguisher maintenance.

The implementation and mobilisation of new work streams, coupled with continuousexpansion and business growth, ensures NLI is well placed to deliver against business planobjectives and its commitment to support disabled persons across North Lanarkshire.

Its vision is to expand NLC' s supported business portfolio, to give people with disabilities theopportunity to enter the labour market whilst ensuring social, environmental and economicvalue for money for all stakeholders.

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Section 2: Business Aims and Oblectives:Aims

This business plan provides an updated review of activity from the previous plan approvedby the Housing & SW Services Committee in April 2015. The continuous strategic objectivesof NLI over the following 5 year period, 2016−2021, underpin it's commitment for businessgrowth, employment and training opportunities for people with disabilities, quality, customercare and securing a sustainable and viable future for NLI.

• To continue to provide sustainable employment for people with varied disabilities

• To compete in a highly competitive 'supported business' manufacturing environment toensure sustainability and continued growth

• To provide quality products within agreed timescales

• Provide value for money in services provided

• To provide a quality service that meets client expectations

• To continue the improvement and development of products and services in line withcurrent trends

• To meet the social inclusion key objectives of North Lanarkshire Council

• To meet the aims and objectives of the Work Choice Programme grants provided by theDWP

• Following approval at the (date of committee), to undertake a wider review of linkedSupported Employment activity across the council (2016−17)

Objectives

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Section 3: Workforce Planning

Aims: Right People ...... Right Skills... .Right Place... .R,ght Time

Effective workforce planning within any manufacturing environment can be challenging,especially with an unpredictable market base, however with growing sector knowledge,increased communication network, supported by a robust and transparent analysis ofrealistic opportunities, NLI is confident it can achieve its goals.

Right People v'

Workforce Type 14%9%'

• Direct − Manufacturing

• Indirect − Admin Support

• Indirect − Management Support

NLI has 41 employees − 30 directly Involved in manufacturing and 11 indirectly involved(management and administrative support). 30 employees have a registered disability. (Seestructure chart below, highlighted in green)

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NLI has an agreed establishment of 45 FTE's (4 vacant). The aim is to increase, throughsustained business growth, the number of disabled persons supported through NLI.

Range of Disabilities:

The types of disability within NLI include physical disabilities, learning disabilities, mentalhealth problems and hearing impairment.

NLI employees with disabilities also cover a wide geographical area extending across 3 localauthorities. NLI receive a cross boundary grant subsidy from each local authority external toNorth Lanarkshire Council totalling £84,000. These local authorities include SouthLanarkshire and Glasgow.

Right Skills vThe established aim of the award winning lifelong learning ethos within NLI is to provide anopportunity for individuals to further develop existing skills and overcome barriers throughfocusing on ability, not disability. Creating an ongoing, tailored learning environment enablescareer progression and promotes life skills through enhanced employability and socialinclusion.

Key Actions include:

• Create individual development pathways for each employee• Support Wider Site development• Create detailed 6 monthly reviews and annual Performance Review Development −

Focusing on strengths/weaknesses and realistic ambition/goals for all our employees• Secure ILA Funding (Independent learning Account)• Progress wider Supported Employment Opportunities across North Lanarkshire Council• Design and Deliver succession planning to provide future business success and

flexibility

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Right Place 1'

NLI' s main operation is based within a 36,000 sq. ft. state of the art purpose builtmanufacturing facility in Wishaw, North Lanarkshire, and is one of the largest supportedemployment facilities in the West of Scotland for people with disabilities. NLI also operatestwo additional sites used specifically for secure document storage, the removal and storageof personal belongings and a one−stop shop furnishing hub.

The facility is well equipped with the latest production machinery combined with a highlyskilled, flexible workforce operating to BS EN ISO 9001:2008 quality assurance.

In 2016/17, NLI mobilised its Removal and Storage work stream. The NLI Canyon Road siteis fully equipped with a large scale racking system aimed at securely storing 110 NLCtenants' belongings. NLI also provide comprehensive goods uplift and storage facilities onbehalf of NLC. Full implementation of bed, bedding and curtain manufacture on behalf ofNLC housing, temporary accommodation and in support of the Scottish Welfare Fund hasbeen undertaken with a mobilisation date of April 2016.

The former Beltane site will continue to provide secure storage facility for records and filescurrently awaiting retention schedule dates. A full review is underway to further utilise theGlasgow Road site with further plans of supporting North Lanarkshire Council HousingServices, and similar, as a furnishings hub.

ICT/Stock Systems:

Currently NLI is utilising the M−Soft MESaLS Stock system however this product is due forannual review and updating. NLI is reviewing its existing stock system, MESaLS, ahead ofits product expiration date of 2017. With no further MESaIS product support offered beyondthis date, NLI will review alternative stock systems that ensure ISO 9001:2008 qualityassurances and extensive stock control with regards to batching, waste management andreduction of aged inventory. It is imperative the updated stock control system supports thedemands and efficiencies required for future NLI work streams.

This system will ensure strict control of all inventories, incoming/outgoing stock while furtherensuring ISO: 9001:2008 standards are maintained across our business activity.

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Right Time v'

Use and Re−use / Upcycling Model:

With ever increasing pressure on Local Government budgets, it is imperative that now morethan ever NLI further promote the up−cycling and re−use model, within the internal andexternal marketplace.

This has been successfully applied through the recent completion of an NHS furniturecontract incorporating this re−use model. NHS listed NLI as one of their 4 largest supportedbusinesses to be utilised in the delivery of the furniture contract with regards to there−upholstery

and re−use model. Benefits of this model include a reduction of cost over new,reduced waste and landfill.

Scottish Framework for Supported Businesses and Factories:

A national collaborative framework agreement for Scottish Supported Factories andBusinesses has been established to provide products and services to the Scottish publicsector.

The framework is reserved for Supported Factories and Businesses as defined in regulation7 of the Public Contracts (Scotland) Regulations 2012 (Article 19 of Directive2004/18/EC). A supported factory/business is "an establishment where more than 50per cent of the workers are disabled persons who by reason of the nature or severity of theirdisability are unable to take up work in the open labour market".

The multi lot/multi supplier framework has been in place for a two year term with recentextension for a further year.

Article 19:

The Article 19 regulations form a part of European legislation that allows organisations toreserve public contracts for supported businesses. The procurement of any goods and/orservices can be reserved. A supported business employs disabled people as over 50% of itsworkforce. This means it's fully acceptable to invite only supported businesses to bid for thework. For contracts under £172,514, business and customers can invite a supportedbusiness to bid.

For larger contracts, constituting authorities simply tick the 'reserve under Article 19' box inthe ELI advert.

The forthcoming change to Article 20 allows organisations to reserve public contract forcompanies who employ and/or supports people who are disadvantaged. As NLI is currentlyoperating as a Supported Business, 28 of the disabled employees are supported through theDWP funded Work Choice Programme. Work Choice is a Government employability initiative

9

aimed at supporting people with disabilities into supported employment with a further aim ofprogressing into unsupported employment.

Work Choice:

Progression and sustaining unsupported employment presents a significant challenge to theGovernment and their prime providers. NLI currently faces a challenging progression targetof 10% of employees into un−supported roles. At present Work Choice currently fund £4,800per disabled Work Choice registered employee. As a Work Choice Prime provider, ShawTrust has received a letter from the Department for Work and Pensions, which sets out thatthe Department currently intends to continue to support Protected Business Places thoughthe period of any potential extension to the Work Choice contracts. It has been agreed thatthe extension to the contact will be until March 2017 in line with the current contract end dateand the pending results of the Smith Commission.

As outlined in the executive summary, NLI has received DWP confirmation with regards toextended Work Choice Protected Place funding until March 2017. The position of thesupported business remains unchanged, the aim is build a sustainable enterprise with a notfor profit' ethos.

Section 4: Products and Services

In the current climate, NLI faces market challenges from other Supported Businesses acrossScotland that may operate a similar model and / or, provide similar products.

The aim is to overcome this challenge by actively building on existing strengths and targetmarkets which include the capacity for larger production volumes and scope for marketgrowth. The soft furnishing production facility of NLI is currently based within its 36,000 sq. ft.purpose engineered factory. This presents a real opportunity to complete for a range of largePCS and Framework tenders and high order volumes from strategic partners.

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Key Work−streams

SOFTFURNISHINGS1

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Soft Furnishing Activity (Re−upholstery I Up−cycling):

The mainstay and core of the business, soft furnishings, continue to form an integral part ofNLI future sustainability and success.

With the focus on providing quality soft furnishings, furniture and upcycling and re−upholsteryservices which can provide cost savings and environmental benefits to customers.

The aim for soft furnishings is to grow a market share through direct market penetration andproduct development across wider local authorities, strategic public partners, leisureproviders, care homes and specific retail markets. Projected figures for the forthcoming 5years indicate that the market informed aims are achievable.

The clear intent is to build on the successes of 2015/16, and make NLI a leadirg supplierwithin the Supported Business sector within soft furnishings. With budget cuts and widerausterity measures continuing to put a clear focus on low cost/high value sustainablereturns, NLI provides public bodies, such as the NHS and care homes, with proven qualityand cost effective furnishing solution through its re−upholstery/up cycling service. Varioussectors now have a cost effective solution via NLI for the re−use of dated furniture throughre−fabricating

with a choice of high quality and modern materials meeting all fire retardantguidelines. For NHS use, a full range of anti−microbial vinyl's/fabrics are available.

The supply and fitting of blinds has significantly increased in 2015/16 with a further potentialopportunity for NLI to manufacture blinds onsite and fit in a wider range of premises acrossan expanding customer base.

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Beds

In April 2016 NLI will fully mobilise its bed base production I mattress supply for use inhousing, temporary accommodation and in support of the Scottish Welfare Fund. The aim isto further support these areas with an agreed product range and guarantee that the productsmeet the required quality standards and comply with the relevant fire safety standards. NLIhas a robust quality assurance process in place, which has been agreed with TradingStandards, which fully addresses any Council concerns and standards.

NLI will also procure mattresses to support the complete delivery of this service; these will beprocured in accordance with Councils General Contract Standing Orders.

Sofa Production

A new range of 1, 2 & 3 seat sofas was developed and launched in September 2014designed for use in NLC housing, temporary accommodation and in support of the ScottishWelfare Fund. The aim was to provide affordable, a high quality crib 5, fire retardant solutionfor their furnishing requirements. As part of FIRA (Furniture Industry Research Association)guidance, NLI complies with their stipulation of fully testing completed products per 2500units manufactured to all areas of Crib 5 Furniture and Fire Safety Regulations (1998).

NLI secured and completed demand for 2,021 units required in 2015/16, generatingprojected income of approx. £580,000.

NLI are developing an A, B & C specification sofa which will be targeted at next stageScottish procurement frameworks, housing associations and private commercial sites.

Moving forward the target income for 16/17 assumes a minimum of 600 units will be ordered.This is a marked reduction of almost 50% from the business plan targets of 15/16. This isdue to changing priorities and customer focus. After discussions with the services, priorityhas moved from sofas to beds, NLI have addressed this challenge and have incorporated inthis business plan a new work−stream for Bed Supply / Manufacture.

The annual anticipated income from this new work−stream will offset the reduction in the sofaproduction for 16/17 onwards. The split of client demand is variable over the next 5 years,however it is forecast demand will not be less than 100 units per annum from Housing and500 units per annum from the Scottish Welfare Fund. These quantities have been agreedwith both services and are based on an analysis of past, current and projected spend.

In line with the NLI lifelong learning approach, the introduction of sofa manufacture hasprovided the opportunity to develop new staff skill sets. These transferable manufacturingskills have aided the implementation for future work streams such as bed manufacturing.Additionally it directly assisted development of extended sofas product ranges which nowinclude dementia friendly high quality bespoke sofa products.

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Removal & Storage

The NLI Removal and Storage facility for personal belongings has opened and was fullymobilised as of September 2015 utilising the newly leased Canyon Road site. This will be thebase for uplift, managed storage and return/disposal of NLC tenant/customer belongings.

A modern racking and two tier racking system ensures safe and efficient storage. Additionalincome is also being generated from the sub−leasing of office space to Mears Scotland LLP.

Fire Maintenance I Homecare Uniforms

In January 2014, NLI took on responsibility to provide site testing andrefurbishment/re−supplyof Fire Extinguishers across both Housing and Corporate Property. Based in the

former Beltane Products site, this business activity involves the periodic inspection, servicingand testing of firefighting equipment, replacement as required, miscellaneous repairs toexisting Council facilities and provision of new equipment to new premises, together withservice and maintenance of dry risers within high rise buildings.

This is delivered by an annual inspection of all firefighting equipment by NLI operativesconsidered as "certified persons" in terms of BS5306, Part 3 2009. Annually, 20% of allhandheld firefighting equipment would be tested by discharging. A monthly report isprovided in respect of properties inspected, certifying that servicing and tests have beencarried out and detailing the outcomes of the testing.

Replacement equipment is then provided where refurbishment may not be practical. Dryrisers will also be tested annually, under pressure, with full reports and certification providedto the client base.

Section 5: Marketing Strategies and Growth

Primary Target Market

The key target market for NIL Industries is therefore the public sector within the UK andScotland in particular. This can include organisations such as:

• North Lanarkshire Council Services

• NHS Scotland

• Housing Associations

• Wider local authority / public sector partners• Public Contract Scotland

• Scottish Prison Service

• Scottish Business Service

• Care Homes Industry

13

Marketing Strategy: The Way Forward

In addition to the strong and valued support from NLC PR Communications, a marketingstrategy has been undertaken by Just Enterprise in conjunction NLI. This has identified keyaction areas with the aim of enhancing future marketing activities and brand.

The following key marketing tools have been identified as part of the Marketing Action Plan2016. Version 1.0 (Scottish Just Enterprise)

I

Marketing Area Action Point

Branding Branding should be reviewed to ensure it is clear to potentialcustomers, creates the desired impression, is memorable and distinct.

Customers • Carry out an annual (online survey, asking potential customersin this target market about their priorities, issues and plans)

• For each product, understand the three most importantfeatures and benefits to target customers as part of acustomer survey

• Review customers to understand which of the marketingactivities were most successful in generating business

• Create Ideal Customer Profiles for each target marketSWOT Carry out a regular six monthly SWOT analysis of NL IndustriesObjectives Regularly review objectives and progress against themUSP Work on defining NL Industries USP when compared to competitorsPricing Regularly monitor the prices of rivals to ensure a competitive positionWebsite To help brand values and convincingly explain services and tell the

NL Industries story, a website should be developed with strongbranding, links, blog, SEO, case studies

SEO Identify suitable search terms and publications for NL Industriesarticles

Videos Create 3 short (1 minute) videos introducing NL Industries and its staffI expertise

eCommunications Identify suitable e−mail marketing tool and send out four newsletters in2016

Awards Continue to apply for relevant awards and ask for at least fivecustomer testimonials for 2016/17

Marketing Develop four marketing documents in 2016 − two product leaflets andMaterials two case studiesSocial Media Identify appropriate social media channels, link to website and

commence usageDirectories Research appropriate directories and ensure NL Industries is listed on

as many as possibleNetworking Continue networking and consider potential events and trade shows

that may be relevant as potential sources of new clients(Reference: (Marketing Action Plan 2016 Version 1.0 Scottish Just Enterprise)

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NLI SWOT 2016117

STRENGTHS WEAKNESSES

• Combined 40 years manufacturing • Marketing materials − limitedexperience brochures and catalogues − online

• Modern purpose built facility presence• Large production capacity • E−Procurement catalogue and pricing• Strong audit trails − FIRA Testing structure.• NLC and DWP backed funding • No e−Catalogue / transactional• Various accreditations including the website

ISO−9001 • Internal staff flexibility and• Highly skilled work force succession planning

• Strong buying power • Low volume work flow

• Excellent geographical location • Low margin for goods and services

• Disabled work force expertise • No dedicated sales team

• Strong company values and ethos • Undefined USP

• Recognised PCS bidder

OPPORTUNITIES THREATS

• Brand matching • Welfare reform under Scottish• Article 19/20 Devolved Powers• Ability to expand work streams to • Loss of DWP funding − Est £134k pa

external partners • Internal NL Partnership issues −• New contracts out with internal reduction of CAB referrals can

council partners directly impact production• Push towards corporate and social • Supported Business competition

responsibility − open new market • Loss of skilled staff − age heavyopportunities workforce

• Brand matching • Staff conflict towards change• Develop business and staff • Reliance of internal council partners• New modern image for work• Multi−skilled work force • Increased supplier costs• Community based work hub/tasters • Quick expansion − lack of training

for local schools and skill• New modern image • Legislation change• New specific marketing including • Staff progression

social media • Lack of bench marking• Lack of core competencies• Work planning• NLC ongoing efficiency measures

15

PESTLE

(Original Business Case)

• Scottish Government desire to maximise use of reserved contracts forsupported business

• Best Value duty to continuously improve efficiency and cost• Scottish Government's freeze on increasing council tax

• Public sector cuts• Change in trade cycles• Welfare Reform

• Public expectation to allocate resources to other employment initatives• Media scrutiny of council investment• Skill set of local population

• Advances in technology• Research and development funding to compete with other business

• Contractual agreements with current providers• Change in product regulations• Alteration of supported employment regulations• FIRA guidance

• Alteration in consumer buying patterns• Pollution implications of additional transportation• Responsible waste and landfill useage

16

Target Market

The key target market for NLI is the public sector within the UK and Scotland in particular.This can include organisations such as:

NHS Scotland

• Local authorities

• Scottish Government

• Scottish Business Service

• Ministry of Defence

• Scottish Prison Service etc.

PCS tender activity and completion has been rewarded with orders for various types of bothstandard and bespoke furnishings across Scotland. With an aim to expand tender activity tonew markets following the set−up and successful development of capacity delivered during2015/16. However relevant PCS tenders with realistic NLI completion can be limited.

Further product development and specific marketing campaigns are vital to NLI' s strategicobjective for business growth in all areas of NLI core soft furnishing production. Continuousresearch and development, pricing analysis, costing exercises, market intelligence,legislative changes and material specifications are essential in order to achieve, maintainand strengthen our market share. Since mobilisation of the NLI sofa in September 2014, theabove criteria has been applied to create a range of varying sofas that will be targeted tohousing associations and strategic partners across Scotland, whilst also opening the door forfurther supplier work. This experience will become invaluable when implementing new worksstreams within similar customer bases.

17

Section 6: Financial Forecasts

General Assumptions

• Employees assumed to be given a pay award of 1% in 2016/17, 1.25% in 2017/18 and 2%Employee thereafter as per Council's approved long term financial plan.Costs

• The employee cost budget recognises staff progression through the current pay and gradingmodel, with projections for vacant posts calculated on the midpoint of the indicative salarygrade.

• Recognising recent changes to state pensions and cessation of National insurancecontracting out arrangements employee on−costs of 12% for national insurance contributionsand 19.3% for employer pension contributions are included within the financial plan.

Property The property cost budget recognises the 3 facilities occupied by NLI.Costs

• Former Beltane Facility, Glasgow Road, Wishaw, was built using a DWP Grant in 1993. Thisgrant was for £627k, the terms of this grant clearly state it must be used as a facility toemploy disabled people, failure to do this would result in the DWP grant being refunded atthe amount of the original loan or 75% of the current value whichever is greater. The buildingis owned by NLC and therefore no rent is payable.

• The annual rent of £142k per annum and 5 yearly increases as stated in the lease agreementhave been accounted for within this budget for the factory at Netherton Industrial Estate.Lease expires on 1st May 2021.

• The Canyon Road facility is leased from NLP at an annual cost of £21 k per annum

Inflationary increases for energy costs have been applied in line with the Councils 10 YearFinancial Plan.

Supplies & Any inflationary increases in materials will be reflected in increased price pointServices

• Transport costs have been based on the current portfolio of 3 vans and 1 forklift truck with noTransport & plans to expand.Plant

Income • At present the Shaw Trust work programme currently funds £4,800 per NLI Work Choicesupported employee. It should be noted that there is no commitment or guarantee beyondApril 2017 for the continuation of the DWP Protected Place funding. However following recentdiscussions with BASE (British Association of Supported Employment) the decision has beenmade to include this funding in the plan from 17/18 onwards, if this is not realised it will beremoved from next year's update.

• Cross Boundary Income will continue, with an annual increase of 1% each year.

18

NLC • The increased Council funding contribution recognises the estimated employee and energyFunding cost pressures built into the Council's ten year financial plan. Whilst these projections are

based on the most up to date information available, there is always a risk that political,environmental or social factors may impact on estimated resources and expenditureprojections

• It should be noted that the Council's Local Government settlement only covers one financialyear at present, 2016−2017. A spending review, of which the length is not yet known, is likelyto take place following May's Scottish elections. In addition, changes in funding of theScottish Government due to the Scotland Bill and proposal for alterations to local taxationmay also impact Local Government and therefore NIL C's finances.

• This business plan and the anticipated Council funding contribution will continue to beupdated on an annual basis to reflect changes regarding the Council's future financialoutlook.

Service • It is proposed that Supported Employment and NLI will be aligned into one service withinReview Housing Property. This will enhance the synergies which exist between the two functions and

will support the joint delivery of related objectives concerning the provision of both directlyemployed and supported placements for disabled persons across NLC.

This review has still to be approved by the Housing and Social Work Committee. Therefore thisimpact has not been considered in any of the financial projections.

Overhead Allocation by %

• Sofas − 12%

• Fire Extinguishers − 8%

Furniture / Storage − 16%

• Beds (New 16/17) − 14%

• 1−lomecare Uniforms − 6%

• Soft Furnishings 1− 31%

e Soft Furnishings 2 (New 16/17) − 13%

Employee, property, admin and transport costs are calculated on an overall basis with anapportionment allocated to each work−stream based on anticipated activity levels and labourhours. Due to the introduction of new work−streams there will be an ongoing review of thelabour allocation which will be undertaken throughout the year

NLC Summary 2016/17 − 2020−21

The income and expenditure projections (incorporating all workstreams) for the next five years are illustrated in the table below, highlighting the required annualCouncil's funding contribution.

SUMMARY

Employee Costs

Property Costs

Supplies & Services

Transport & Plant

Administration Costs

Other Costs

ProjectedOut turnI

Budget 5 YearI

Budget 16/17 Budget 17/18I

Budget 18/19I

Budget 19/20 I IBudget 20/21@ P12 2015/16 I I I I Totals

935,653 1,027,763 1,062,819 1,104,743 1,135,580 1,164,163 5,495,068

193,228 236,135 236,968 238,815 240,802 242,936 1,195,656

687,371 745,342 746,199 747,897 751,451 757,001 3,747,890

24,152 38,290 38,290 38,290 38,290 38,290 191,450

33,605 29,871 29,871 29,871 29,871 29,871 149,355

Total Expenditure 1,874,009 2,077,401 2,114,147 2,159,616 2,195,994 2,232,261 10,779,419

Income 1,249,335 1,533,614 1,533,614 1,533,614 1,533,614 1,533,614 7,668,070

Shaw Trust Grant 134,000 134,000 134,000 134,000 134,000 134,000 670,000

Cross Boundary Charge 84,848 85,696 86,553 87,419 88,293 89,176 437,138

Total Income 1,468,183 1,753,310 1,754,167 1,755,033 1,755,907 1,756,790 8,775,208

Operating Deficit

Required NLC Funding Contribution

NLC Funding Contribution %

One−off funding (Rent Rebate Drawdown)

405,826 324,091 359,979 404,583 440,087 475,471 2,004,211

248,841 324,091 359,979 404,583 440,087 475,471 2,004,211

13% 16% 17% 19% 20% 21% 19%

156,985 − 0 0 0 − 0 − 0 − 0

Soft Furnishings Other 2016/17 − 2020/21

This is an expansion of the soft furnishings workstream, anew workstream for NLI going forward from 16/17. The workstream has been established in reaction to changingcustomer priorities and demand

SOFTFURNISHINGSOTHER − CURTAINS, Projected

BEDDING AND BLINDS. SOCIAL SECTOROutturn 15/16

B u d g e t16/17

IIIBudget 17/18

B u d g e t

18/19B u d g e t

19/20 Budget 20/21 Budget YearTotalsI@P12

I

I II I

Employee Costs

Property Costs

Supplies & Services

Transport & Plant


Other Costs

Total Expenditure

Income

Shaw Trust Grant

Cross Boundary Charge

Total Income

Operating Deficit

Workstream Assumptions

− 298,338 302,895 308,346 312,355 316,070 1,538,005

− 228,050 228,152 228,256 228,361 228,467 1,141,287

− 70,289 74,743 80,090 83,994 87,603 396,719

Employee! Property Admin & Transport costs a e calculated on an overall basis with an apportionment allocated to eachworkstream based on anticipated required labour hours. As this is n e w workstream an ongoing review of the labour allocation willbe undertaken throughout the year.

Supplies & Services represent the material costs required for the workstream with the estimate based on anticipated quantities xcurrent unit price for each sales item. Direct material Costs will increase in line with sales. Please note there is currently a costingexercise underway in conjunction with procurement to ensure the cost of materials is competitive.

Sales income targets incorporate projected quantities from the workstreams main customer base (Housing! Scottish Welfare Fund).An analysis of customer spend in sundry soft furnishings over the past 3 years, coupled with detailed discussions with the relevantservices, have enabled the calculation of prudent projections. The three main areas identified under the sundry soft furnishingcategory are currently curtains ,blinds and bedding (all social housing quality). Sales targets which are highlighted in the table belowwill be closely monitored as the business plan and the new workstream progresses.

An estimated annual income of 632k in relation to existing document storage (with a retention period of 5 years) is also includedwithin the sales income for this workstream

Product DescriptionBed Room Curtains Standard With 54 DropBedroom Curtains Standard Width 72 DropLiving Room Curtains 1.8w x 54 DropLiving Room Curtains 1.5w x 72 DropRoller Blinds 61cms 160cmRoller Blinds 91cm a 160cmRoller Blinds 122cmx 160cmRoller Blinds 152cms 160cmVertical Blind 61cmx 160 cmVertical Blind 91cm a 160 cmSingle Bedding Set )Duvet Cover, Fitted Sheet, 1 Pi l low CxxSingle Valance −STANDARD NOT FIRE RETARDENTSingle Duvet Cover − (STANDARD NOT FIRE RETARDENT(DbI Bedding Set standard −NOT FIRE RETARDENT)DbI Valance standard STANDARD NOT FIRE RETARDENTPillowcases x 2 − STANDARD NOT FIRE RETARDENT

STANDARD NOT FIRE RETARDENT

Anticipated Annual Quantity

Housing Welfare Fund I Total

100 − 100383 − 383

71 173 244197 563 760449 449108 108

28 2826 11 37

245 245145 145

1,766 1,456 3.2229889

161134301

797

9889

1,958134301

TOTAL 8,301 3,000 8,301

Bed Supply /Manfacture 2016/17 − 2020/21

This is new workstream for NLI going forward from 16/17. The workstream has been established in reaction to changing customer priorities and demand

BEDS

Employee Costs

Property Costs

Supplies & Services

Transport & Plant


Other Costs

Total Expenditure

[come

Shaw Trust Grant

Cross Boundary Charge

Total Income

Operating Deficit

ProjectedOutturn 15/16 Budget 16/17 Budget 17/18 Budget 18/19 Budget 19/20 Budget 20/21

Budget Year

@P12 oas− 1 1 4 3 , 8 8 7

148,795 154,664 158,981 162,983 769,310

− 32,785 32,785 32,785 32,785 32,785 163,925

− 257,817 257,817 257,817 257,817 257,817 1,289,085

− 7,468 7,468 7,468 7,468 7,468 37,340

− 4,182 4,182 4,182 4,182 4,182 20,910

− 385,738 385,857 385,979 386,101 386,225 1,929,899

− 60,401 65,189 70,937 75,132 79,010 350,670


S Employee, Property, Admin & Transport costs are calculated on an overall basis with an apportionment allocated to eachworkstream based on anticipated required labour hours. As this is a new workstream an ongoing review of the labour allocationwill be undertaken throughout the year.

Supplies & Services represent the material costs required for the workstream with the estimate based on anticipated quantities xcurrent Unit price for each sales item. This material cost also includes the cost of the mattresses. It was felt it would be moreprudent for NLI to purchase the mattresses from a third party and supply to the customer at cost price, due to the initial capitaloutlay required for new machinery if manufactured by NLI. Direct material costs will increase in line with sales.

. Sales income targets incorporate projected quantities from the workstreams main customer base (Housing/ Scottish WelfareFund). An analysis of customer spend on beds over the past 3 years, coupled with detailed discussions with the relevant services,have enabled the calculation of prudent projections. See below for a breakdown of annual projected quantities:

r iouuct uescripuonDouble Divan Bed (Base & MattressDouble Bed BaseDouble Divan Bed (Waterproof)Double MattressDouble Mattress (Waterproof)Single Bed BaseSingle Divan Bed (Base & Mattress)Single Divan Bed (Waterproof)Single Mattress

TOTAL


HousingI

Welfare Fund Total

216 1,000 1,21628 2817 18 3510 1029 2930 30

249 2,056 2,30521 21

30 3030 30

639 3,095 3,734

− 446,139 451,047 456,916 461,233 465,235 2,280,570

Sofa Production 2016/17 − 2020/21

This business activity involves the supply and manufacture of 2 & 3 seater leather sofas to Houisng Operations and the Scottish Welfare Fund.

SOFAS

Employee CostsProperty CostsSupplies & ServicesTransport & PlantAdministration CostsOther Costs

Total Expenditure

IncomeShaw Trust GrantCross Boundary Charge

Total Income

Operating Deficit


S

S

S

ProjectedOutturn 15/16 Budget 16/17 Budget 17/18 Budget 18/19 Budget 19/20 Budget 20/21 Budget Year Totals

@ P12

327,016 123,332 127,539 132,569 136,270 139,700 659,41069,996 28,512 29,345 31,192 33,179 35,313 157,541

213,483 93,424 93,424 93,424 93,424 93,424 467,120

19,929 3,585 3,585 3,585 3,585 3,585 17,923

630,424 248,853 253,892 260,770 266,457 272,021 1,301,993

457,622 174,000 174,000 174,000 174,000 174,000 870,00050,920 16,180 16,180 16,180 16,180 16,180 80,90031,920 10,284 10,386 10,490 88,293 89,1761 208,630

540,462 200,464 200,566 200,670 278,473 279,356 1,159,530

89,962 48,389 53,326 60,100 − 12,016 − 7,335 142,464

Employee, Property, Admin & Transport costs are calculated on an overall basis with an apportionment allocated to eachworkstream based on anticipated required labour hours. Due to the introduction of workstreams,there will be an ongoing review ofthe labour allocation which will be undertaken throughout the year.

Supplies & Services represent the material costs required for the workstream with the estimate based on anticipated quantities xcurrent unit price for each sofa. Direct material costs will increase in line with sales. Please note there is currently a costing exerciseunderway in conjunction with procurement to ensure the cost of materials is competitive.

Sales income targets incorporate projected quantities from the workstreams main customer base (Housing! Scottish Welfare Fund).Annual projected quanities are shown in table below.

Note this is a marked reduction from the orignal quanities projected in last years business plan, this reduction of almost 50% was dueto changing customer priorities. An analysis of the 15/16 customer spend on sofas has been carried out, coupled with detaileddiscussions with the relevant services, have enabled the calculation of prudent projections.

Anticipated Annual QuantityHousing I Welfare Fund I Total

Product DescrStandard Sofa

TOTAL

I 1 0 0 5 0 0 1 600I

100l 5001 6001

Furniture Removal and Storage 2016/17 − 2020/21

This workstream was fully mobilised as of September 2015. It provides the uplift, manage storage and return / disposal of NLC tenants / customer belongings.

REMOVAL AND STORAGE


P r o j e c t e d 1 1 1I Budget5YearItur

P12n 15/16Out

@Budget 16/17

FBudget 17/181 Budget 18/19 Budget 19/20 Budget 20/21

Totals_ _ _ _ _ _ _ _ _ _ _ _ _ _ _______

130,806 164,442 170,051 176,759 181,693 186,266 − 879,21125,788 37,390 37,390 37,390 37,390 37,390 186,950

108,609 − − − − − −− 4,740 4,740 4,740 4,740 4,740 23,700

7,342 4,779 4,779 4,779 4,779 4,779 23,897

Total Expenditure 272,545 211,351 216,960 223,668 228,602 233,175 1,113,758


Total Income 212,230 264,511 264,649 264,787 264,927 265,068 1,323,942

Operating Deficit / Surplus 60,315 − 53,160 − 47,688 − 41,119 − 36,325 − 31,893 − 210,184


S

S

.

Job Detail

StorageRemovalsRedeliveriesDisposalsUpl i f t t o Stores

Employee, Property, Admin & Transport costs are calculated on an overall basis with an apportionment allocated to eachworkstream based on anticipated required labour hours. Due to the introduction of workstreams,there will be an ongoingreview of the labour allocation which will be undertaken throughout the year.

Supplies & Services represent the costs required for the purchase of crates in 16/17. No further spend has been identified forfuture years as Canyon Road will be at full capacity.

Sales income is directly aligned with demand as profiled during management activity from the previous contractor (see tablebelow )and forecast in line with capacity at the Canyon Road facility.


No. o f Housing NLC Tenant orooerties

108

55392

50500

Total

10855

39250

500

TOTAL 11,105

11,105 1

Fire Extinguisher Maintenance 2016/17 − 2020/21

This business activity involves the periodic inspection, servicing and testing of fire fighting equipment, replacement as required, miscellaneous repairs to existing Councilfacilities and provision of new equipment at new premises

FIRE EQUIPMENT


Total Expenditure


Total Income

Operating Deficit / Surplus


.

S

PthjëtëOutturn 15/16 Budget 16/17 Budget 17/18 Budget 18/19 Budget 19/20 Budget 20/21 Budget 5 Year Totals

135,002 128,303 128,303 128,303 128,303 128,303 641,515

49,047 34,204 37,008 40,362 42,829 45,116 199,517

Employee, Property, Admin & Transport costs are calculated on an overall basis with an apportionment allocated to each workstreambased on anticipated required labour hours. Due to the introduction of workstreams,there will be an ongoing review of the labourallocation which will be undertaken throughout the year.

Supplies & Services represent the sub contractor costs and material costs required for the workstream and are based on historical andfuture needs analysis informed by all current service delivery activity. Direct material costs will increase in line with sales. Please notethere is currently a costing exercise underway in conjunction with procurement to ensure the cost of materials is competitive.

Income targets are based on historical and current service delivery activity across linked council assets. (see below (Further scope existsfor next phase related business development activity across wider public sector partners and customers this will be reviewed during2016/17.

Anticipated Annual QuantityNo. of Units Total

Job DetailFire Extinguisher Servicing 11,000 11,000Dry Risers (Housing) 48 48Dry Risers (Corporate Property) 98 98Replacements (Ad Hoc) (Based on averageamount of E45 per replacement) 804 804

500 500

TOTAL

184,049 162,507 165,311 168,665 171,132 173,419 841,032

Furniture / Re−upholstery and Up−cycling 2016−17 − 2020−21

This business activity involves re−upholstery and up−cycling models. In addition it provides all other soft furnishing activity (excluding social housing bedding /curtains andblinds) to a range of customers both internal and external.

Furniture/Re−upholstery and u p − O u t t u r n 15/161 Budget 16/17 Budget 17/18 Budget 18/19 Budget 19/20 Budget 20/21 Budget 5 Year Totalscycling

Employee Costs

Property CostsSupplies & ServicesTransport & PlantAdministration CostsOther Costs

Total Expenditure 514,263 568,704 580,428 595,123 608,236 622,647 2,975,138

C0 meShaw Trust GrantCross Boundary Charge

Total Income 426,658 440,984 441,250 441,518 441,789 442,063 2,207,603

Operating Deficit 87,605 127,720 139,178 153,605 166,447 180,584 767,535


Employee, Property, Admin & Transport costs are calculated on an overall basis with an apportionment allocated to eachworkstream based on anticipated required labour hours. Due to the introduction of workstreamsthere will be an ongoing review ofthe labour allocation which will be undertaken throughout the year.

Supplies & Services represent the material costs required for the workstream with the estimate based on anticipated quantities xcurrent unit price for each sales item. Direct material costs will increase in line with sales. Please note there is currently a costingexercise underway in conjunction with procurement to ensure the cost of materials is competitive. Further savings in material costsare being looked at with regard to costing / charging sample rooms.

This workstream includes both recurring and ad−hoc customers with sales income targets directly aligned with demand as profiledduring the 14/15 − 15/16 sales activity.

Income targets are split between the external marketplace (52%) and the internal marketplace (48%)

Homecare Uniform Embroidery

HOMECARE 1 j u 1 IBudget 16/17 Budget 17/18 Budget 18/19 Budget 19/20 Budget 20/21 Budget YearLir;nMTotals


Total Expenditure 148,209 141,509 143,613 146,128 147,978 149,693 728,922

IncomeShaw Trust Grant

−Cross Boundary Charge

Total Income 118,150 97,549 97,600 97,652 97,705 97,758 488,263

Operating Deficit /Surplus 30,059 43,960 46,013 48,476 50,274 51,936 240,659


Employee, Property, Admin & Transport costs are calculated on an overall basis with an apportionment allocated to eachworkstream based on anticipated required labour hours. Due to the introduction of workstreams,there will be an ongoing reviewof the labour allocation which will be undertaken throughout the year.

Supplies & Services represent the material costs required for the workstream with the estimate based on anticipated quantities xcurrent unit price for each sales item. Direct material costs will increase in line with sales. Please note there is currently a costingexercise underway in conjunction with procurement to ensure the cost of materials is competitive.

All income is sourced from Social Work Homecare Services based on on historical and current income trends for this workstream.

19

Going Forward

Over the past 2 years NLI has met the challenges of a continually changing marketplacewith continued support from NLC and other local authority agencies.

The future for NLI is encouraging as a key player and provider of quality soft furnishings andfurniture manufacture as a supported business.

NLI will continue to maintain its high quality standards and work towards its main objectiveas being a leading example of a "not for profit organisation" .....Whilst providing aninvaluable contribution as a supported business for disabled persons for North Lanarkshire.

A review, to further align Supported Employment and NLI will be undertaken at a future date,determined by service requirements.

s c a l e j ë w e−

16/17 − 20/21 To grow NLI into a fully sustainable 'Not For Profit' supported enterprise overthe next 5 years.

16/17 − 20/21 To increase the level of employees with disabilities to 45 FTE as agreed in theprevious business plan, approved at the Housing & SW Services Committee(April 2015)

16/17 − 20/21 Develop and implement a systematic workforce planning model which supportsdisabled persons, developing strong culture of employee engagement, opencommunication and active employee led business development.

16/17 − 20/21 Achieve all set income and expenditure projections 2016/17 − 2020/21

16/17 − 20/21 Develop next stage expansion proposals for NLI to further diversify! consolidatemarket bases (as appropriate)

16/17 − 20/21 Develop and integrate supported employment activity and potential synergiesacross wider North Lanarkshire Council (2017−18)

Documents

REPORTAGENDA ITEM No. −−3−− · 2016-04-21 · NORTH LANARKSHIRE COUNCIL REPORTAGENDA ITEM No. −−3−− To: HOUSING & SOCIAL WORK SERVICES COMMITTEE Subject: NORTH LANARKSHIRE