JCB wants to give buyers the tools to 'put their arms around' £400m of spend © JCB
JCB wants to give buyers the tools to 'put their arms around' £400m of spend © JCB

How JCB set up a new indirect procurement function

JCB built an indirect procurement team to control £400m of spend and introduce savings. 

Speaking at the CIPS UK Conference in London, Rob Metcalf, group purchase manager for global planning performance at JCB, said previously the firm had limited information on where money was spent and with which suppliers.

He said: “We created a new indirect purchasing team, and we needed to give them the system and tools to put their arms around £400m spend.

“We didn't have full visibility on where we spent money, on what and why. It took spend control and analytics with a new informed buying team to actually understand why everybody was buying the same things from different suppliers at different prices.”

He added: “We wanted to drive unit price reduction on leveraging volume, driving that through catalogues and enforcing the contracts behind those catalogues.”

This created efficiencies and savings by consolidating indirect materials.

Previously, the firm had been delegating the purchasing of indirect materials, which equated to a quarter of its direct material spend, to the business department. 

JCB equipped the procurement team with a procure-to-pay system, one of many ways the company has adopted technology over the past five years. The system aimed to reduce payment queries on invoices and combat late payments that would otherwise undermine relationships with suppliers, Metcalf said.

He emphasised that the catalogue system helps drive the procurement team to use the company’s preferred suppliers, enables ease of use and encourages procurement professionals to share best practices between separate divisions.

“There are now 1,300 internal users on the system, and not all of them use it often, so it's about making the system very easy to use,” he said.

Ultimately, Metcalfe said that what made the change and got stakeholder buy-in was how the system would remove the extensive number of physical invoices for indirect spend that were processed by accounts payable by hand.

The procure-to-pay system allowed JCB to achieve 95% digital invoices, and as reporting is now mandatory, a significant increase in on time invoice payment performance.

The SAP Ariba system doesn’t allow suppliers to submit an invoice before the goods or services are received or submit an invoice that exceeds the purchase order value, he added.

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