5 November 2009 | Allie Anderson in Brussels
Purchasing was "not fit for purpose" at National Grid before it embarked on an ongoing transformation, according to global procurement director Jon Carlton.
The energy giant is 18 months into a radical overhaul of its global buying function to increase efficiency and achieve savings of up to £350 million a year.
Speaking at the ProcureCon conference in Brussels this week, Carlton said: "We had to create a whole new organisational structure that included everything from upskilling the workforce to becoming more strategic than transactional and bringing in new IT tools. There was no single aspect of procurement that was fit for purpose at the start."
Buyers at the energy firm had focused on getting contracts in place on time, rather than looking at how much could be saved. In addition, National Grid business units developed product and service specifications with little involvement from purchasing.
The department has now engaged with stakeholders so its impact, in terms of cost savings and operational efficiency, becomes more transparent. Support and investment at executive board level was fundamental, as was improving buying talent, particularly on category management.
"By bringing in the right people with the right skills, we were able to look at each spending category in isolation and assess what savings could be achieved from each," said Tony Martin, global programme director of procurement transformation. Categories were prioritised based on where the biggest savings could be achieved first.
With 97 per cent of annual spend going through more than 2,700 suppliers globally, Martin said there was scope to reduce vendor numbers. He added: "We are continuing to work with those suppliers with whom we can develop more strategic relationships."
Carlton said the transformation programme had so far exceeded expectations, but there was a great deal of work to be done. "All the transformational aspects are OK in isolation, but the fact that we are doing it all at the same time is very difficult. We still have a long way to go, perhaps another 10 months until it is all finished. It is then that we will really see the benefit of what we have done."