City Link saves with takeover

23 May 2007
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24 May 2007

One of the UK's biggest express delivery companies is forecasting huge procurement savings following a recent takeover and the introduction of a new buying team.

City Link bought rival firm Target Express (TE) in December for £210 million and work to consolidate the businesses (and their joint £60 million spend) commenced at the beginning of this month.

Mike Harrison, City Link's integration project director, told SM procurement would bring "early wins" by improving spend and eliminating duplicated buying. A target of £1 million of savings has been set for the end of 2007.

The company has been creating greater buying power over the past 18 months by buying back 57 depots that it sold to franchisees, taking the total number up to 70. Harrison said this improved the power it had when buying vehicles and fuel from single sources.

He added such power would grow now the firm has increased revenue, by over 60 per cent, to a predicted £420 million following the takeover.

Ian Lathey, a procurement manager from City Link's parent company Rentokil Initial (RI), was seconded three months ago to lead a new buying team. Procurement was previously performed at the RI level or through other functions, such as finance.

As director of procurement, with a team of eight drawn from TE and City Link depots, Lathey says his primary focus is to ensure there are formal buying processes across the business. He hopes this will give visibility of spend, allow the company to gain control of suppliers, drive purchasing compliance and provide savings.

He said he would seek to take advantage of RI spend with utilities, stationery suppliers and other goods and services that are common across the group.

He adds his biggest single challenge is accessing data on what is spent, with whom and how. "The TE side improved its procurement over the past five years in terms of processes, controls and data. On the City Link side, the data is more fragmented, particularly as we are still integrating so many depots."

Lathey says the team is likely to increase in number as TE and the depots are integrated and a long-term procurement strategy develops.

The merged firm has been trading solely as City Link since 1 May and the firm's brand is now on all 4,350 of its delivery vehicles.


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