Jaguar Land Rover outsources material stores to boost savings

12 October 2012

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12 October 2012 | Anna Reynolds

Jaguar Land Rover (JLR) will outsource the engineering material store at its facility in Solihull next Monday, as the next step in a “high priority” project to improve stock management and make savings.

When JLR separated from Ford back in June 2008, it was left with four manufacturing sites at Gaydon, Solihull, Castle Bromwich and Halewood, each independently managing its engineering material stores.

Next week, all stock will be moved from Solihull and will be distributed to a consolidated site in the West Midlands. Only the Halewood plant in Merseyside will retain its own store.

Previously there was no shared visibility of stock, part number structure or defined processes for managing the four stores. With a supplier base of 73, there were large amounts of administrative work, requiring JLR to increase its workforce. In 2009 a cross-functional team was set up of JLR’s three senior directors responsible for purchasing, manufacturing and materials, planning and logistics.

Brian Davy, purchasing director at JLR, said: “This project needed high priority. By ensuring that we cleaned up our issues first before eventually outsourcing, we managed to deliver substantial value for the business.

“The key to initiating this project was ‘upside-down’ procurement, in other words looking at procurement priorities in a different way. Traditionally, procurement did not manage the materials stores, however the stores had a disproportionally negative impact on the perception of procurement within JLR. When someone can go and buy a hammer cheaper from B&Q than within JLR stores, it’s procurement’s name that is tarnished.”

Working with its suppliers, JLR has reduced the number of parts in stock by 90 per cent from 88,000 to 8,000. They have also reduced the number of suppliers from 73 to 36, using those who provided best value.

By creating a common part number code stock in one store is now available to all. By implementing a new IT system, stock was made visible across all the sites and weekly meetings were held with manufacturing, stores and procurement teams to agree the purchase of any new parts.

Operating costs have been reduced by £1 million and the cost of parts purchased came down by £1.7 million. By simplifying stock holding, costs were down from £40 million to £8.9 million. The net effect of these savings is a decrease in the cost of production of each vehicle by £34.

Further cost-reductions are expected as the stores move offsite to an external provider, freeing up valuable real estate for the production of vehicles.

Margaret Beever, senior purchasing manager at JLR, told SM: “This is a great example of the difference purchasing can make to a business when working as part of a cross functional team. We not only delivered fantastic cost savings but we also improved the supply chain at all points, and most importantly increased the customer satisfaction from the end users of this service.”

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