13 October 2008 | Jake Kanter
AkzoNobel, the world's largest paint manufacturer, has centralised its procurement operations as part of a plan to save ?100 million (£79 million) by 2011.
Over the past two years the Dutch chemical company has increased the spend controlled by procurement from ?500 million (£396 million) to at least ?6.5 billion (£5 billion). The firm is also working to establish "key supplier agreements" to forge more productive and innovative partnerships with vendors.
Speaking at an investor conference in London this month, chief executive Hans Wijers, said: "We are now in a unique position to use our scale on purchasing".
He explained buying power is vital to avoid the current "tsunami" of high raw material prices. "To protect your profitability and sometimes improve it you must have a stronger focus on operational effectiveness. In these challenging markets, only lean companies succeed."
The company has pooled its global purchasing of commodities such as resins, solvents and pigments. CPO Ton Geurts is working with its main suppliers to create agreements that will include building partnerships in areas such as technology as part of a push to develop more products.
Leif Darner, board member responsible for performance coatings, said: "These are win-win contracts where the supplier can grow with our success."
AkzoNobel has also increased training for purchasers and assigned buying teams to different materials to improve the professionalism of the department. Rob Frohn, board member responsible for speciality chemicals, said the sector often fails to value procurement as much as it should.
He added it was important AkzoNobel addressed its formerly "fragmented" approach to procurement. A study carried out by Accenture earlier this year found chemical firms would benefit from a more structured approach to procurement (Web news, 4 January
"We have lifted purchasing to a higher level of professionalism to ensure it makes its contribution," Frohn said.
The new ?100 million cost reduction goal will be in addition to the ?340 million (£269 million) savings the company targeted after it bought rival British firm ICI in January. Wijers said the organisation is already realising the benefits of the project and is confident it will meet its savings target. AkzoNobel would not confirm its savings to date.