Group sourcing programme

Stronger supplier relationships

Making the most of Kingfisher’s unique competitive advantage

As the leading home improvement retailer in Europe and Asia, with operations in nine countries, Kingfisher has a scale and international reach which give it unique competitive advantages. But these advantages can only be truly realised with the Group’s commercial function, its operating companies and its global supplier base working closely together.

A year of significant change saw a thorough re-engineering of Kingfisher’s international commercial organisation, designed to bring it closer to the businesses it supports, define shared priorities and launch a series of initiatives that will deliver against those priorities.

Progress was made in several key areas, notably direct sourcing, developing supplier partnerships, common purchasing and reinforcing own-brands.

Direct sourcing continues to drive quality, innovation and value

Kingfisher’s direct sourcing network, which enables Group companies to buy goods directly from the manufacturer, offers major competitive advantages, not least the ability to secure lower prices for our customers. Increasingly, Kingfisher is also using direct sourcing to drive quality, innovation and design excellence in the products it buys.

Last year, the value of Group purchases made through the direct sourcing network increased by 17% to US$821 million (at factory prices). Combined, approximately 17,000 individual products generated 10% of total Group sales revenues.

Growth was particularly strong in the decorative, lighting and bathroom categories, as customers recognised great value from recently introduced stylish ‘designer’ products which, thanks to Kingfisher’s global scale, are priced very competitively.

Coverage of the world’s key product supply markets was extended by the opening of a direct sourcing office in São Paulo, Brazil, which provides greater access to the rich natural resources of South America, such as FSC certified timber, natural stone and ceramics. The new office joins existing ones in Shanghai, Hong Kong, Poland and India, each specialising in distinct product areas that, when combined, provide the broad range of options demanded by product buyers within Kingfisher’s businesses.

Also last year Kingfisher held its largest Vendor Conference, which brought together around 150 suppliers from Asia, Eastern Europe, South America and India to meet with buyers from across the Group. The event, held in Shenzhen, China, focused on further strengthening existing relationships and working together to develop growth opportunities.

Common purchasing programmes

Last year saw the development of common purchasing programmes dedicated to key product ranges within categories such as tools, light bulbs and wood flooring. More than 20 programmes are now under way, covering own-brand as well as third-party branded products, and more are in the pipeline.

By bringing product buyers together for joint purchasing trips and dedicated networking events, these programmes allow greater sharing of ideas and expertise between Kingfisher’s largest businesses, as well as boosting the Group’s purchasing power. Crucially, they also allow Kingfisher to take the lead in determining the design and specifications of many products, using the in-house design and product benchmarking expertise of B&Q UK and Castorama France.

Using quality own-brands to add value and grow market share

Continued progress was made throughout the year to strengthen and diversify Kingfisher’s own and exclusive-brand portfolio, notably in hand tools, power tools and decorative products. Kingfisher’s own-brands in these areas include Performance Power and MacAllister power tools and the Colours range of decorative products, which includes paint, wallpaper, lighting and soft furnishings.

Developing strategic supplier partnerships

During the year, negotiations took place with approximately 20 key strategic suppliers responsible for a significant proportion of Group purchases, aimed at putting in place international contracts that will improve purchase terms, facilitate the development of common ranges between operating companies and secure exclusive products. With much of the groundwork now complete, these agreements are due to be finalised in the 2008/09 financial year.