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  • Writer's picturePeter Smith

TUESDAY 5th OCTOBER 1999: Show Me the Money

We get a call from one of my managers at 9 am to say his train has been turned back towards Reading and he doesn't think he will make it in this morning- some sort of accident he thinks. A fairly poor excuse, I tell him; jokingly of course. But within half an hour the Internet is talking about a major crash just outside Paddington, and as the numbers of estimated casualties go up the mood becomes quite sombre. Most of us travel on fairly dreadful and very crowded trains every day, and several use that line - although luckily L, who sometimes catches that precise train, is not due to be in today.

We have been working on purchasing savings figures that we can put into the bid defence document. They are largely based around the development of "e-procurement" - use of the Internet and electronic communication in the purchasing process. We want to develop electronic catalogues that NatWest staff can access on their PC's and which will enable them to buy items like stationery and basic IT stuff through a direct Internet link with our nominated suppliers. There would be more sophisticated processes, but still using similar links with key suppliers, for things like booking travel and finding temporary staff. There would also be a more "old fashioned" requisitioning system, using SAP software probably, so that staff could send an electronic request to the purchasing department if what they want is not available through the Internet supplier links.

All of this should enable us to give staff an easy, quick way of ordering, but also allows us in purchasing better control over what people spend and with which suppliers they spend it. Transactions should be quicker and cheaper for our suppliers and us. And if we can direct everyone to buy only from the suppliers my team select, then we can negotiate better deals because we can absolutely guarantee the suppliers our business. The principle is carrot and stick; the new systems will make it easier for users to place orders, but only with the suppliers we define.

I have a meeting with KPMG, NatWest's auditors, who will sign off all our defence documents and statements in terms of verifying that they are reasonable (i.e. our Board didn't just make up the numbers over a few beers.) It is a difficult meeting.

KPMG field their purchasing expert who does not like the way we have calculated the savings.

His argument is that each purchase order in the average company costs £50 before you install e-procurement systems, and only around £10 after, hence you multiply the number of orders by £40 to get your saving. I think this is over-simplistic because for a start we don't know what each order currently costs now. It is impossible to generalise because there are so many different processes around the Group for ordering different things.

Anyway, much of the notional "saving" often quoted is made up little bits of time spent by various people who each play a small part in the overall purchasing process. Unfortunately, 10 minutes of Bill's time per week, plus 20 minutes of Freda's time once a fortnight and so on doesn't add up to real savings (in other words real people you can get rid of.) I want to take a more detailed and realistic approach based on savings we think we can make in each purchase area (stationery, print, PC's etc.) We finally agree on the broad numbers but I have to do some more justification.

During the meeting, and using my finely developed upside-down reading skills, developed over many years of negotiating across the table with suppliers, I see a spreadsheet indicating where cuts in Head Office costs might be coming. I can't see too much detail but it looks quite drastic in some areas. I wouldn't like to be in NatWest Consultancy just now.

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