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8 August 2012 | Adam Leach
The procurement function at HMV has made significant savings by taking a strategic approach to purchasing – improving its reputation with stakeholders as a result.
In 2007, the HMV Group, which at the time included bookshop chain Waterstones, decided it would develop a strategic and centralised procurement function. Prior to this, stakeholders were responsible for buying their own supplies, meaning there was very little strategy behind purchasing. “The top line was, we’ve got £125 million in spend, we want to shave that by 10 per cent over a three-year period,” Paul Barker, head of procurement at the entertainment retailer, told SM.
Barker set about getting some quick wins to prove the central function’s capability early on. “All the low-hanging fruit became easy prey for us, so that’s what we went for. We spent three years going over the big areas of spend, things like energy, couriers, stationery, carrier bags, waste and cleaning. In all those areas, we were spending between £2 million-£5 million and in media, we were spending £11 million a year,” he said.
In the first year, the team delivered some significant savings, underpinned by the Wax Digital web3 sourcing platform, such as a £2 million reduction in print spend and a £1.5 million cut from courier spend by setting up central contracts to manage the company’s total spend. And by changing the way it bought energy, switching from a set tariff and going through a broker instead, it shaved more than £1 million from its bill.
The quick wins were a “good starting point” for the team to prove its worth from a financial point of view, but convincing stakeholders of the value of procurement was harder. “We were seen by stakeholders as a tool to knock them down, take away their budget and spend lines, and question them about how they were managing their business,” said Barker. “We were delivering the savings, but we were viewed with an air of suspicion over those three years.”
But once this “low-hanging fruit” had been picked and procurement at the company became more about getting the best value on deals – in addition to the tough trading environment and further restructuring – the standing of the function began to rise.
“We are now seen more as a department that can help deliver cost savings from contracts, but also help the process and take some of that workload away from those departments that are feeling the pinch a little, so we are now integral. We’re probably more sought after now than we ever have been,” said Barker.