Rationalising materials handling equipment and adding bespoke items saved £50,000 a year
Rationalising materials handling equipment and adding bespoke items saved £50,000 a year

Case study: Enabling Formica's return to profit

The team met challenging KPIs and helped laminate firm achieve a return to profit in less than three years 

With losses amounting to £12.8m (NZ$25.5m) and 1,000 employees’ livelihoods at stake, a new leadership team was brought into Formica Europe to get the business back to profitability. The firm, run as a separate entity under the New Zealand firm Fletcher Buildings, has sites in Finland, Spain, France and the UK – where its North Shields site produces 60% of the laminate it sells to customers. While sales were falling and costs spiralling, a new procurement director was tasked to ‘transform European procurement from an underperforming, disengaged, tactical function to a value-focused strategic team’. 

Enter Philip Hicks FCIPS: “We needed to quickly understand where we were and where we needed to be. How big was the gap? Discussions with stakeholders confirmed the worst; we had a lot to do.”

Hicks realised the need to grab the attention of the leadership team – the new procurement plan had to be simple, and clear on how it supported the business turnaround. “We needed to start delivering value and building credibility immediately,” he says. 

At Formica, familiarity with procurement was low, but Hicks gained a place in the leadership team – a first – and, after organising supplier segmentation, the leadership team was brought to sessions with strategic suppliers, educating business leaders on the value of collaboration while building relationships. 

The European procurement team led by Hicks has been so successful that it’s now responsible for all direct and indirect sourcing. In 2017 the team expanded, taking additional responsibility for raw material inventory management, import/export, storage and logistics. It has achieved bottom line savings of £1.6m (NZ$3.2m) and has worked to bring 75% of controllable spend under contract. 

A review of materials handling equipment (MHE) used for transportation of materials, resulting in a fleet reduction of 20% and an annual cost saving of £50,270 (NZ$100k). Workshops with suppliers proved valuable in specifying not just a ‘replacement’ but the latest in MHE technology, including bespoke kit designed for Formica tasks. 

Hicks explains that by focusing on the delivery of savings, his team – which was awarded 2019 CIPS SM Procurement Team of the Year, Small Teams – has “earned the right” to get involved with more strategic elements. “At first we focused on the low-hanging fruit, but the catalyst for building credibility was through delivery,” says Hicks. “It comes from recognising where you can deliver tangible value quickly and making it happen.”

Winning prospects

The award-winning small procurement team at Formica Europe was recruited from talented professionals who are all either full or chartered CIPS members, fellows or working towards MCIPS. 

According to staff surveys, team engagement is up by 20% to 78%, while stakeholder feedback also highlights professionalism and energy within the team. 

The team recently took part in a 5k charity inflatable run in aid of Formica-supported charities. “Our procurement team has undergone major people change in the past two years,” says Michelle Robson, people and performance director, Formica Europe. “We have seen new team members recruited who have evolved into a fast-paced, hit-the-ground-running, high-impact, high-performing team that strive towards a sustainable commercial future for our business.”