Group buying programmes
Doubling Group sourcing
With a direct sourcing network that covers South East Asia, India, Latin America and Eastern Europe, the Kingfisher Sourcing Organisation (KSO) offers the Group’s retail businesses access to innovative, quality products and competitive pricing.
Last year KSO shipped products with a total value of US$696 million (at factory prices), compared with US$821 million the year before, with the decrease mostly due to lower seasonal buys and stock reduction programmes in our stores. Direct sourcing now represents 10% of total Group purchases. Strong performances were recorded in hardware, hand tools and garden power tools. The total number of product lines developed by KSO rose from 17,000 to 18,000 in the year.
As part of the ‘Delivering Value’ strategy, Kingfisher is committed to increasing the proportion of purchases made through its direct sourcing network, to 18% of the cost of goods sold in 2011/12. This will be achieved by further strengthening the sourcing network, as well as developing greater synergies with suppliers, in order to leverage the Group’s purchasing scale.
Several key initiatives were put in place during the year to help deliver this plan.
The Kingfisher Sourcing Organisation showroom in Hong Kong displays an array of recent products selected by Kingfisher operating companies.
This project was set up to improve the efficiency of product delivery from factories to our businesses. In early 2008 a new process started where, instead of each manufacturer shipping products to us individually, Kingfisher’s orders from multiple manufacturers are consolidated at the port and shipped together in mixed containers. This is now happening at three key ports, Shanghai, Ningbo and Shenzhen. Between them, these ports handle 70% of Kingfisher’s direct sourced shipments.
This new approach to handling imports ensures that container space is much more fully utilised. By extending this trial, we anticipate that Kingfisher will be able to reduce its overall freight costs, cut ongoing inventory requirements and, by shipping fewer containers, lower its carbon footprint.
Work continued on Kingfisher’s portfolio of own brands, which includes the Colours range of decorative products and MacAllister power tools. The newly revamped range of Kingfisher’s own-brand Performance Power tools went on sale in September 2008. Around 70% of products are common between the businesses that stock this new range (B&Q UK, Castorama France and Koçtaş), while packaging has been consolidated to just two multilingual variations, giving scope for Performance Power to be rolled out to other countries.
Working with our strategic suppliers
In 2008 we signed a number of international contracts with 18 key strategic suppliers who together represent a significant proportion of Group purchases. These strategic supplier partnerships help to improve buying terms and enable us to secure exclusive products across all Group businesses. The international contracts team also supports our newer, fast-growing businesses in their negotiations with international suppliers.
In January 2009, the commercial teams of Castorama France, Brico Dépôt, Screwfix and B&Q UK visited KSO offices in Hong Kong to share strategies and agree development plans for key direct import suppliers. Around 45 KSO suppliers attended the event and key categories such as hardware, hand tools, electrical, lighting and showroom were identified as strong potential candidates for cross-OpCo synergies.
Targeting savings in goods not for resale
Detailed analysis completed in 2008 revealed that Kingfisher’s major operating companies spend £1.1 billion each year on goods not for resale (GNFR) – the term used for the products and services needed to run their businesses rather than those sold to customers. Some 15 projects are currently under way, each one aimed at exploiting our global purchasing scale to extract further value from indirect purchases. Areas covered include mechanical lifting equipment, trolleys and waste management services.
Kingfisher continued to work with suppliers to improve labour and environmental conditions in the supply chain through factory assessments, training and partnership projects. Our overseas sourcing offices audit all new factories against the Kingfisher Code of Conduct for Factory Working Conditions. Factories are also audited on a regular basis. A total of 411 factory assessments were carried out in 2008/09. Factory manager programmes, such as the one held in India in March 2008, also provide further guidance and support.
Rationalising the fulfilment of containers shipped from Asia helps to reduce freight costs.