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21 March 2011 | Lindsay Clark
UK supermarket Morrisons has launched ambitious procurement plans to save £100 million on its indirect expenditure.
Broadening addressable spend, the retailer said that it had saved £28 million from indirect procurement expenditure in the year ending January 2011. This would reach £60 million this year and, by the end of financial year 2013/14, save £100 million.
Chief executive Dalton Philips said the company aimed to “cut the bad costs” out of its business.
He said while the previous procurement programme was focused on 30 per cent of goods not for resale and the profit and loss elements only, it now hopes to address 100 per cent of indirect spend. “This time nothing is off limits,” he said. “Our taskforce has been looking at every aspect of spend. We’re challenging specification and reviewing our capital expenditure.
“We now believe we will save £100 million by 2013 from tackling indirect procurement,” Philips said.
In addition, he said the company would save money while expanding its retail estate. It aims to reduce the cost of building and fitting-out new stores by £2-3 million per shop “by challenging specifications and trialling new materials”. The process would also cut the time taken to open new stores by 30 per cent.
“This will be the first in a series of end-to-end process reviews that will change the way we work to cut the bad costs out of our business,” he added.
In January, Morrisons said it was better able absorb increased costs in retail goods because its own-brand products were more extensive than other supermarkets. “Because we manufacture so many of our products ourselves we have an ability to take costs out of the supply chain and pass them on to customers quickly,” Philips told BBC Radio 4’s Today programme.