“It’s a major change activity adding millions to the bottom line that needed best practice materials and people.”
Geoff Wells, Global Indirect Programme Manager, British American Tobacco
Continuously improving productivity helps British American Tobacco invest in brands and secure earnings growth. To remain competitive, the group sought reduced complexity and costs across its entire supply chain. Two years ago, it announced a commitment to reduce annual overheads and indirect costs by an initial target of £200 million per annum by the end of 2007.
Historically, British American Tobacco had managed indirect procurement activities in its end-markets each with dramatically varying levels of maturity. Introducing global consistency across the organization was a key aspect in delivering the aggressive targets. Integrating and implementing a common “best practice” organizational set up, processes, policy and a single instance procurement system within its ERP environment would optimize supply chain performance, enable the reduction of indirect spend and ensure compliance.
Capgemini was entrusted to help the company steer the program and a joint team opted for a phased approach that initially focused on British American Tobacco’s top 14 end markets. These markets accounted for some 70% of the total indirect expenditure.
British American Tobacco is now buying more efficiently by leveraging its professional procurement people, process and global presence for improved economies of scale. Having saved £64 million and a further £89 million in the first two years of the program, the group has twice raised its five year savings target on overheads and indirect purchases to the current figure of £400 million per annum by the end of 2007.