Heathrow Airport’s procurement team is implementing a category management approach, improved supplier-relationship management (SRM) and a push on sustainability over the next five years.
Speaking to SM at the Heathrow Business Summit yesterday, procurement director Ian Ballentine said the move is a response to a £600 million efficiency target on operating cost.
“We spend £1.8 billion per year across our capital and operating business so a key part of this is how we can spend more efficiently,” he said. “This isn’t about squeezing the margins, that’s not going to work. Our strategy is going to be about innovation, smarter ways of working, getting suppliers to look at what they are doing with other clients and give us some of these ideas.”
The team has been working on category management for the past six months and will set up the first category next year, focusing on people which includes recruitment and training.
“What we have found already is that we have a disaggregation of suppliers in certain areas where would rather a lot fewer, or we’ve got people going off buying things differently to other parts of the business,” said Ballentine. “So it just allows us to bring together a good strategy.”
For SRM, Ballentine said Heathrow wants to create strong strategic relations with its top 55 suppliers by meeting with them a few times a year to discuss business strategy.
“We feel that this front-end category strategy aligns business-thinking with the market,” he explained. “And then the back-end supplier relationship aligns multiple contracts with single suppliers.”
He added the business is also engaging with second and third-tier suppliers. “It kind of makes sure that we’re a responsible client, so we’re not just interfacing with the tier-one suppliers.”
For sustainability, the company wants to make sure it is engaging with the local community and charities. This includes reducing noise and pollution, and working with suppliers that have the same enthusiasm.
John Holland-Kaye, development director at Heathrow, added working with SMEs is also key. “A lot of the great ideas come out of SMEs because it’s a couple of people talking about why do we do things this way and not that way?” he said.
He used the example of a small company, which has a software can be attached to CCTV to detect if someone has crossed a boundary. “Something like that is small and relatively cheap, and can be added to our existing infrastructure. By seeing the idea from the core supplier we can see how it could fit in.”
Holland-Kaye said asking a large company to come up with a similar idea could cost a lot of money.