9 November 2010 | Lindsay Clark
Premier Foods has cut supplier numbers by 11 per cent over a single quarter as part of a bid to boost efficiency.
The firm, which produces brands including Hovis and Mr Kipling, praised buyers’ efforts in an interim management statement last month saying that “procurement efficiencies and cost savings have been found to fund increased marketing”.
Mark Hughes, Premier group procurement director, said the move to cut its supplier base was designed to create a more productive relationship with its top vendors.
“We have actually cut our supplier numbers by 11 per cent in the latest quarter and our top 100 suppliers, which represent 45 per cent of our spend, have experienced real growth of 33 per cent over the past three years,” he told SM.
The firm deals with about 7,000 suppliers and aims to reduce that to below 5,000 over the next three years.
By focusing on less than 4 per cent of its suppliers, Premier could now address the vast majority of its spend, he said. “Our top 250 suppliers, which we can have quite a constructive, two-way relationship with, represent 78 per cent of our spend.”
The food firm was able to take such a radical approach to supplier reduction because both operations and procurement teams share efficiency targets, which creates buy-in from the manufacturing side of the business, he said. “We have a stated aim to reduce our manufacturing controllable costs by 4 per cent year-on-year. That might be an operations target but it is jointly supported by the procurement team. Having joint deliverables and objectives has been really important in the success of that programme, because then we achieve supplier consolidation, simplification, and standardisation of what we buy.”
Hughes said the company was on target to meet these efficiency savings by the end of the year. “Having a joint target across operations and procurement has been one thing that has driven engagement and therefore delivery because everybody has a vested interest in delivering the overall target.”
These relationships had also enabled the procurement team to collaborate on reducing carbon emission across the business, he said. In 2009, the firm had cut energy use by 5.2 per cent and reduced carbon by 7.7 per cent.
In September, Premier Foods was overall winner at the CIPS Supply Management Awards for its work with strategic supplier British Sugar that accrued £5.7 million savings in two years.