6 October 2011 | Paul Snell
Category: Best purchasing initiative by an SME
Winner: Neal Brothers
Cost cutting is important in the export packing industry, where profit margins are low. Neal Brothers met both CSR and financial goals, making £388,000 in savings
Neal Brothers combined cost savings with corporate social responsibility to scoop the award in this category. According to the firm, the achievements of the procurement team have saved jobs and kept the company in business.
Profit margins in the export packing industry in which the firm operates are very low, so the company has to keep prices down to stay in business. “To safeguard jobs we had to find ways to cut the costs,” says the company’s financial director Mark Williams. “The importance of having a professional purchasing function in the organisation became apparent.”
In addition to this pressure to save money, strict environmental legislation governs the packaging sector. Without the right accreditation, the company would not be able to export its wooden cases abroad. Timber purchasing costs the company more than £1 million a year, so developing a system that allows this to be traceable and compliant was vital.
The group’s procurement project had three main goals: to improve the sourcing and management of timber to reduce costs; to cut the amount the company was spending on waste disposal; and to introduce an online purchasing system for the company’s spend on other materials.
The project was led by the company’s head of procurement, Elena Selezneva. To achieve the first aim, the company decided to buy its wood directly from sawmills, cutting out the third-party agencies it had been purchasing from. This was expected to reduce costs by 20 per cent annually. But the firm still needed to ensure – and be able to prove – its timber was ISPM 15 (the International Standard for Phytosanitary Measures) compliant.
To meet the requirements for auditing, such as proving that the timber met the required specification, Selezneva introduced a barcode system. This allowed the business to trace and track its stock – an improvement on the previous system that consisted of scribbled notes that lacked detail and omitted the reason for stock shortages.
The success of the scheme in the UK also meant it could be transferred to company operations elsewhere in the world. Dealing directly with mills in Romania – once ISPM 15 certification had been achieved – has cut timber costs there by 53 per cent.
Overall, the change in approach has saved the company more than £388,000, which is paying 23 per cent less per metre cubed than the average UK agency price in 2010.
☛ Watch the post-award interview here: tinyurl.com/nealbrothers
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