Procurement at heart of cost management changes at Lloyds

23 December 2011

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23 December 2011 | Rebecca Ellinor

Procurement at Lloyds Banking Group is now involved in discussions about business needs from the start after a reorganisation supported by the company’s CEO.

As part of the company’s Group Strategic Review, there has been a big focus since the spring on cost management. As a result, CEO António Horta-Osório established 14 ‘cost management units’ to segment the total budget and each is ‘owned’ by the most appropriate business executive to ensure there is a single view on all areas of operations. The chief information officer owns IT, the chief marketing officers owns marketing and so on. Procurement is at the centre of each of these units to take out "bad cost" by challenging demand and design specifications as well as advising on the right approach to sourcing.

Procurement director Mike Whitby told SM: “It’s been a really big change for Lloyds and has given group procurement a much clearer line of sight on demand management and a seat at the table on all expenditure. It’s the best opportunity we’ve ever had to add value to the business.”

Whitby said in the case of the cost management unit for training, for example, there had been significant demand challenge, design specification work means far more training is now delivered through e-learning, suppliers have been reduced by 1,200 and millions has been saved for Lloyds as a result.

Whitby said the company is also reducing the number of providers it uses and spending more with its top 100 suppliers. Whitby said there had been a very “strong response” from suppliers in helping the business take bad cost out.

Horta-Osório will return to the business next month after a two-month break from work prompted by overwork. Asked if his absence had affected procurement, Whitby said: “You always miss someone who is good. He has been inspirational for us, he has given us line of sight you could only dream of. I have missed him as a chief executive but for procurement it hasn’t made much difference because the new structure was already in place.

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