FKI Energy Technology (formerly Engineering) comprises 11 businesses in 8 locations in 4 European countries. The company recognised that this multi-site structure made purchasing collaboration a priority if true leverage and cost improvements were to be achieved.
Under-resourced purchasing with under-achieving buyers using a limited number of techniques had led to considerable inertia with sourcing restricted to local long established sources.
Sponsored by the Chief Executive and working extensively with the Head of Purchasing, the aim was to refocus purchasing from a predominantly transactional activity to a strategic profit control. This was achieved through the development of the organisation, practices and people.
One of the main elements of the programme was the creation of a Strategic Purchasing Steering Group. The Head of Purchasing was a key member of this group and was integral to rolling out the programme throughout the organisation. The key approaches included creating and sustaining a mandate for change, introducing effective purchasing measurement to drive performance, restructuring, resourcing, people education and skill transfer. Initial launch workshops were used to kick start this project.
Following these workshops ADR worked in each autonomous business unit to develop the people, processes and organisation through action learning and coaching. This approach allowed local autonomy to be maintained which was vital in ensuring acceptance of the initiative by the organisation.
The Steering Group met regularly to review the pace and scale of change and the savings achieved in each business unit, and to resolve roadblocks and to agree methods of dealing with areas of resistance.
After 18 months, further workshops were undertaken to create awareness of the structures and techniques needed to build strategic control of key categories.
Cross-business category management teams with wider sourcing horizons were established leading to the deployment of longer-term Supplier Relationship Management (SRM) approaches. These teams were reinforced by the recruitment of a small group of centrally located strategic category managers.
When ADR exited, FKI had effective organisation, processes and practices in place with a strong purchasing team comprising people with the right level of technical and behavioural skills. Moreover, savings achieved during the programme were more than 14 times ADR’s fees.
In 1999, the UK Engineering Group FKI saw its Total Shareholder Return increase to 71%, giving it the highest position of any UK company in that sector within Europe that year. Although this achievement could be attributed to several initiatives launched within the business, there is no doubt that the focus placed upon improving purchasing performance made a significant contribution
Performance measuring and coaching Skills Transfer Purchasing workshops
Refocus and develop the purchasing team
Significant savings Increased ROI