Planned Maintenance Engineering Limited - a case study
Planned Maintenance Engineering Limited (PME) was formed in 1962 by A C Stevens. He had the vision to recognise that the rapidly growing use of technology in commercial and government was creating a need for a service provider with specialist skills in the operation, maintenance and repair of building services.
The company provides a complete Facilities Management service and has an annual turnover in excess of £130 million.
Assessment
The organisation has undergone major re-organisation and is now Divisional based. In 1999 CY Associates were commissioned to undertake a high level purchasing audit to document and understand the current purchasing activities. Strengths and weaknesses would be identified and any potential opportunities for improvement. A crucial part of the Audit was to highlight possible cost savings across all Divisions.
The following areas were covered by the Audit:
- Direct Costs – Lamps/tubes, filters, electrical (general), mechanical (general), materials and small tools
- Maintenance – Premises, security systems, electricity, gas, telephone systems, mobile phones, postage £ couriers, printing, stationery, office equipment, archiving, cleaning services
- Transport – Contract lease, daily hire, fuel
- Computer Systems – PC maintenance, pc consumables, hardware
- Purchasing Process – Order requisition, authorization, placement of orders, invoice approval
Interviews took place with the relevant personnel at the Battersea and Birmingham office to ascertain what the current practices were.
Findings
The CY Purchasing Audit identified that within PME there is enormous potential for reducing both the purchase price of goods and services procured and the associated processing costs. There was duplication of effort therefore making processing costs relatively high. Certain areas of the business had no purchasing policy or guidelines and no external benchmarking of suppliers was undertaken.
The majority of staff that are responsible for purchasing have received no formal training, have limited knowledge of vetting suppliers and do not know the capabilities of their current suppliers. There are a large number of suppliers with some having very little expenditure. Purchasing was viewed as a transactional activity with adversarial supplier relationships.
Summary
CY Associates advised PME to adopt a philosophy for working with managers/users at a strategic, rather than transactional, level to develop systems and appoint effective methods/sources of supply. This will build confidence with users by demonstrating good purchasing practices whilst managers gain an appreciation of local issues
CY recommended:
- The introduction and development of "state of the art" ordering methods (e.g. electronic ordering, purchasing cards) which are less cumbersome, more cost effective, reduced user errors, user friendly and alleviate a serious administration burden
- Reducing the supplier base and appointing key preferred suppliers and national arrangements across all Divisions with local ordering, direct delivery and consolidated invoicing to reduce administrative overheads and expenditure
- Implementing "PME" terms and conditions for major suppliers of goods and services which are more favourable to PME than current supplier agreements.
- Developing innovative relationships with both suppliers and other purchasers (e.g. PME clients) that will result in improved terms, reduced expenditure and a competitive edge
