6 October 2011 | Adam Leach
Category: Most improved purchasing operation – step change
Winner: Balfour Beatty
With the launch of its Group Aggregated Common Expenditure programme, Balfour Beatty was able to trim down its supplier base – and make significant savings
How many office suppliers does a large construction company need? If you asked Balfour Beatty 12 months ago, they would say 200; if you asked them now, they would say just one.
A year ago, the construction giant managed contracts with 200 vendors to fulfil its needs for the 13 companies that fall under the Balfour Beatty umbrella, but following the January 2010 launch of the Group Aggregated Common Expenditure (GrACE) programme to centralise purchasing across the various arms of Balfour Beatty, it has significantly trimmed down its supplier base.
Sponsored by chief executive Manfred Leger (then managing director) and spearheaded by Andy Haworth, MCIPS, programme director, it had four objectives: to cut costs; improve quality and service; establish efficient, effective and informed sourcing; and become a customer of choice to the best suppliers.
The team identified potential savings by creating a ‘spend cube’, which combined all areas of expenditure into a single place. More than two million lines of data from 15 systems were mapped, representing £4.9 billion of spending with 27,000 suppliers.
With a clearer idea of just how significant the potential savings might be, the team came up with a savings target of £12-18 million within 10 categories to be delivered in the first year.
A category management process was initiated with specific managers, supported by groups of stakeholders called ‘virtual category councils’, given responsibility for overseeing categories of expenditure.
The company also created a supply chain development role to oversee areas where the programme could be improved.
The programme resulted in a number of changes to how the procurement process in the company was conducted. Most significantly, a new Customer Support Centre (CSC) in Newcastle was established, which brought together finance, HR and procurement teams under one roof, allowing them to work collaboratively on delivering the savings.
And deliver savings they did: overall, the GrACE programme brought about a drastic change in how the company purchased supplies and created savings of £15 million, safely within its target of £12-18 million.
Equally important are the organisational changes, which include the creation of a shared services centre for category management, executive board sponsorship for supply chain management, divisional heads of supply chain management, and the creation of a best practice centre of excellence.
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