Royal Mail overhauls spend

5 July 2009

06 July 2009 | Jake Kanter

The Royal Mail has restructured procurement and is targeting more than £100 million savings this year.

Under the leadership of Kath Harmeston, group procurement and facilities management director, the organisation has split its £2.5 billion annual spend between four "master categories" and created a "quick wins" group for less strategic purchases.

The procurement team has secured greater power over company-wide investment projects and established a quarterly strategic procurement council, where group board members are told about buying decisions and invited to support initiatives.

The restructuring is designed to make procurement a "business partner" to the Royal Mail Group, rather than just a service, Harmeston told SM.

"Traditionally we bought for and on behalf of the business. Now we're acting as strategic advisers."

The four master categories are: FM, property and shared services; business services; vehicles, assets and logistics as well as IT, telecoms and automation.

Each unit is aligned to internal stakeholders and works on long-term spending plans, for up to 36 months ahead. Meanwhile, a team of 11 buyers in a quick wins group mops up the tactical spend areas across categories.

Three months ago procurement was also given a voice in all Royal Mail spending programmes. And now the department has to sign off an investment project before it goes to the board for approval.

Harmeston said this enables the team to better prepare for future purchases: "We warning of what is coming, so we can be more practical at preparing the supplier markets."

Last week the Royal Mail held a supplier conference where preferred vendors from all categories were asked to reflect lower commodity prices in contract terms. It is also going to cut its supplier numbers, but would not confirm how many would go.

Harmeston, who has been CPO for six months and took on FM responsibilities part way into the role, said the changes would help deliver more than £100 million of savings this year. This is in addition to the £300 million target set three years ago by previous CPO Ninian Wilson.

The team has saved around £227 million of the original target to date.

Harmeston said the restructure has not gone unnoticed by the board: "There has been a groundswell of support for procurement as a result of our work in the past six months."


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