15 February 2001 | David Arminas
International building materials group RMC has embarked on a major purchasing shake-up in the UK. The company wants to establish cross-divisional spending and get greater leverage from its purchasing outlay.
The strategy will include reorganising purchasing into categories of spend, such as quarry supplies and petroleum products, with a view to supplying all RMC companies. In the UK alone, there are four divisions with 32 operating companies.
Historically, purchasing staff have been scattered across the divisions and work under local command. "Most decisions are taken at local level, with the role between purchasers and users often being blurred," said Ian Bolger, UK procurement director.
Spend category teams will be set up to give the new strategy a managerial structure.
Bolger, who was supply chain procurement director with Guinness in the US before moving to RMC last month, expects to make a 10 per cent saving on RMC's annual indirect spend of between £150 million and £200 million. RMC, which has no operational e-procurement system in place, is replacing eight legacy systems with SAP. Bolger hopes to eventually introduce purchasing cards.
Supplier relations will also be reviewed. "This is good news for the 6 per cent of suppliers that make up the 80 per cent of our spend," Bolger said. "We will be seeking to develop stronger relationships with our key suppliers. However, there will be significant reductions in the 25,000 suppliers to the RMC group, and those suppliers who cannot embrace the new ways of working will lose business over time to their competitors."
Keeping purchasers onside is a main issue for major strategy shifts in any organisation, noted Peter Smith, director of procurement services at management consultancy Shreeveport.
"Local people will see the downside and the removal of autonomy. You have to persuade them of the benefits such as better prices or improved service from suppliers," said Smith who was group purchasing director at NatWest before its takeover by Royal Bank of Scotland.
"If you don't keep people informed there will be a fear factor," added consultant Tim Ussher, of Watson Wyatt Worldwide. "When I became head of procurement at Williams there was me and 90 managers, and nothing in between."