Group buying programmes

Strong performance in direct sourcing

Growing Group sourcing is one of the seven steps identified by Kingfisher as key to delivering value for our shareholders. Buying directly from our suppliers gives us greater control of the product sourcing process, helping us to maximise quality, value and innovation as well as reducing time to market. Having a strong direct sourcing network also enables us to capitalise on our international scale by making it easier for our retail businesses to create common ranges for our stores.

Last year, the Kingfisher Sourcing Organisation (KSO), was further strengthened with a new buying office in Vietnam, which joined the established teams in China, Hong Kong, Poland, Brazil and India. In addition, four new category managers were appointed, with this new senior-level position having responsibility for driving common ranges and buying synergies. A Global Quality Plan was implemented to ensure the sustainable development of our direct sourcing activities and dedicated IT systems were introduced to manage all quality requirements. Suppliers were also required to sign up to Kingfisher’s Code of Conduct.

Together with the other initiatives highlighted below, these efforts helped Kingfisher grow the value of direct shipments to US$794 million (at factory prices), up from US$696 million the previous year.

Maximising our buying strength

Good progress has been made on the direct sourcing of goods by individual Kingfisher businesses in recent years, to the extent that we are now better placed to move towards more cross-Group sourcing. In 2009, three quarters of total KSO spend was with shared suppliers (supplying two businesses or more). Castorama France and B&Q UK, our two biggest businesses, worked particularly closely on seasonal and garden furniture ranges, organising joint buying trips to China, Hong Kong and India.

In power tools, a four-way collaboration between Castorama France and Poland, Hornbach and Koçtaş resulted in joint buying of 64 products, most notably for Kingfisher’s own-brand MacAllister.

Closer relationships were also forged domestically. In the UK, B&Q and Screwfix established over 100 common products in electrical extension leads and cabling, while in France Castorama and Brico Dépôt jointly purchased 3,700 km of composite decking.

These programmes have generated bottom line savings and have also enabled the buying teams to drive technical innovation, particularly in MacAllister power tools.

Kingfisher’s retail businesses are now working to align their sourcing strategies in key categories such as technical lighting, paint, roof windows, storage, and plumbing and heating. The target is to achieve a fully aligned range review calendar within the next three years. In order to accelerate this process, Kingfisher’s businesses are working closely to build a shared portfolio of exclusive own-brands with multi-lingual packaging.

Driving supplier performance

We continue to develop our strategic supplier partnerships, with an increasing number of international contracts now in place. We are also providing further support to our newer and fast-growing businesses in their relationship-building with international suppliers.

In October 2009 the Kingfisher Supplier Conference in Paris had as its theme ‘Re-invent the home’, giving our buyers and suppliers the opportunity to share their views on consumer lifestyle and home improvement trends.

Further progress in goods not for resale

Kingfisher also applies the principles of collaboration and leveraging our buying strength in the area of goods not for resale (GNFR) – the products and services we need to operate on a day-to-day basis. Our largest businesses in the UK and France have generated significant cost efficiencies through bypassing agents and other middlemen to deal directly with GNFR suppliers; while at a Group level we have established a network of preferred suppliers who now compete for contracts with our various global retail businesses. Collaborative buying programmes have taken place in a number of key areas, including catalogue paper, mechanical handling equipment, display racking and shopping trolley baskets.

Ethical sourcing

Kingfisher continues to work with suppliers to improve labour and environmental conditions throughout our supply chain. The Kingfisher Sourcing Organisation (KSO) audits the factories of every new supplier against the Kingfisher Code of Conduct for Factory Working Conditions. Factories of our established suppliers are also audited on a regular basis. In total we carried out some 541 factory assessments during 2009/10. Factory manager training, as well as partnership projects such as the greener production programme in Hong Kong, provide further guidance and support.