Procurement provides Go-Ahead Group's route to savings

2 September 2011

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2 September 2011 | Angeline Albert

Reducing supplier numbers, renegotiating contracts and centralising the procurement of buses has contributed to £16 million cost savings at the Go-Ahead Group.

The bus and train operator said cutting 1,200 suppliers supported savings that helped company increase profits by 14 per cent to £115.1 million.

Go-Ahead has also centralised the procurement of buses, which was previously handled by individual companies it controls such as the Oxford Bus Company and Metrobus, to maximise spend. In total the group operates around 3,800 buses in the UK.

In the rail part of the group, the company has renegotiated contracts with suppliers, for goods such as staff uniforms and the price charged to the company by Network Rail to access rail tracks. Around £13 million from improved contract management in this part of business of the £16 million savings are one-off savings that will not be repeated in the future. Go-Ahead runs three train franchises - Southern, Southeastern and London Midland – through a joint venture.

In its financial report for the year, Go-Ahead said: “We have maintained a strong discipline in cost control and this remains a priority with initiatives focusing on both procurement and scheduling efficiency. The operating profit from our rail division was in line with our expectations and significantly ahead of last year, benefiting from a continuous shift away from car usage, innovative marketing, rigorous cost control and procurement and contract management benefits.”

In rail, the group said it “will continue to drive revenue and control costs to help offset the challenges of reduced subsidies/increased premiums in its franchises”.

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