Royal Mail has said it is over half way through an SAP based e-procurement programme, designed to save £300 million.
The mail delivery company, owned by the government, is ripping out a mix of Ariba, Microsoft Excel and Microsoft Access programs and standardising its procurement around SAP. It is working with consultancy Deloitte on the three year programme.
It has also built a module to track and improve supplier relationships, based around SAP supplier relationship management. This will form a major part of the cost cutting, it told delegates at the Forrester Services and Sourcing Forum in London last week.
Jay Doyle, head of vendor management, said Royal Mail had cut the number of procurement centres it runs from 10 to two, set up a single system for sourcing goods and services, and set clear categories and methods to be used.
In 2006, when Royal Mail began considering the programme, “no one wanted to be part of procurement”, he said. “Now, we have a clear procurement function in IT.”
But while there were strong improvements in procurement, some tough work remained, Doyle explained. “We need to improve strategic relationships, between IT, logistics and people,” he said.
The SAP-based supplier relationship module, already in operation, will aim to bring these parties closer together, he said. It includes an overview of the relationship with each supplier, news, a profile of the supplier, a tracking summary, and a five year plan agreed with the supplier.
It can also be printed off as a concise summary for chief executive Adam Crozier to examine.
In one supplier contract, with Atos Origin for healthcare services, Royal Mail said it has saved £14 million over five years. It renegotiated the contract, it said, moving to a ‘pay as you go’ model and improving performance. The improvement in the service also reduced staff absenteeism, saving £52 million last year.