Supplier management The supply base has been integral to the success of the cost- saving programme. Aluminium of Greece adopts different approaches according to the supplier segmentation and the importance of the category of products or services to the organisation. For commodities, where there is no differentiation or strong relationships with suppliers, cost savings are sought through strategic sourcing projects that are mainly price orientated. For more strategic categories, Aluminium of Greece adopts a collaborative approach and encourages suppliers to identify opportunities to reduce costs. There is also a focus on supplier innovation and ways to improve the total cost of ownership, which includes the overall direct and indirect costs across the organisation of using a particular product or service, not just the initial purchase price. Suppliers that manage to identify ways to reduce costs continue to provide products and services to the organisation. “The message to the suppliers was straightforward,” says procurement director Michalis Fratzeskos. “Support us to remain competitive in order to keep doing business with us.”
In 1996, when Aluminium of Greece was part of the Pechiney Group, a big restructuring project was launched to embed a common ERP solution and procurement policies across all of its manufacturing facilities. The project lasted for over three years and delivered significant results, including a consistent ERP system across the group, better positioning of the procurement function and a set of best-practice operating principles. These agreed principles were mandated across all purchasing teams and ensured better control and management of third-party spend. The success of that project was also reflected in the use of the ERP tool not only as a mechanism for capturing transactions, but also for supporting all procurement processes. Since that project, and the subsequent acquisition by Mytilineos Holdings SA, a leading Industrial group in Greece, the ERP system has evolved and been supplemented with additional functionality. However, the basis of the procurement operating principles has remained intact and is now driving consistency and compliance across the organisation. Cost-savings programme To ensure sustainability and growth, Aluminium of Greece has implemented a number of cost-saving programmes in the past 10 years. In 2009, the company set a formal target of achieving savings of around €20 million a year across all organisational functions. In the two years of the programme, the procurement function delivered annual savings of about €6-7 million. The programme was welcomed by internal stakeholders who have supported and contributed to its success. The procurement part of the programme consisted of a number of initiatives, the main pillars of which are as follows: 1. Strategic sourcing Led by procurement, sourcing has been streamlined and focused, among other parameters, on delivering savings. Cost reduction does not come primarily from reducing the prices of products and services, but mainly from reducing the total cost of ownership. 2. Strategic investments Aluminium of Greece has invested in improving its production facilities and processes, which have resulted in a significant reduction in production costs. 3. Innovation One of the biggest results of the continuous focus of the procurement function on streamlining operations has been a rise in the level of commercial awareness across the company. This is reflected in the numerous cost-saving initiatives and ideas that have originated from the team. Procurement is used to challenging both internal stakeholders and suppliers in order to identify opportunities where money can be saved.
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