Purchasing shake-up to save Post Office millions

1 March 2001
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01 March 2001 | Cathy Hayward

The Post Office is set to make savings of over 7 per cent, around £64 million, of its £1.2 billion procurement budget this year, according to its director of purchasing, Alan Jackson.

The savings will come through fuel hedging, increased centralisation of purchasing and the use of purchasing cards. "These are real savings," Jackson told SM. "It's not suppliers coming in with inflated prices and us knocking them down to a little above what we were always paying."

The figures are the latest in a four-year purchasing drive that has so far saved the Post Office £250 million.

A fuel hedging strategy, launched in October, has already saved £350,000 from the Post Office's £220 million annual fuel budget for its 36,000 vehicles. The strategy, where buyers make a commitment in advance to buy oil at a certain price and then receive delivery at a later date, has helped the Post Office estimate future fuel costs.

"Whether prices are high is immaterial. What is important is that they're stable, so that we can plan, budget and know what our costs are," said Jackson.

Peter Cooke, head of the centre for automotive industries management at Nottingham Trent University, said controlling fuel prices was important for a firm that relied heavily on its fleet and fuel hedging was just one way of achieving this. "Other big operators buy fuel abroad, others have forward agreements with their suppliers or, like logistics company TNT and major supermarkets, stockpile fuel in bunkers to guarantee a stable price and supply," he explained.

Additional savings from an e-procurement programme, which was launched in November and is now being extended across the organisation, are also predicted. "We'll save time and effort as we won't have people doing so many mundane transactional jobs," said Jackson. "But we can't be entirely certain where e-procurement is going. It's definitely a journey rather than a destination."

By the end of the year, the Post Office, which recently changed its name to Consignia, plans to increase centralisation of purchasing by reducing its 13 nationwide purchasing departments to six centres.


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