How leading port operator Peel Ports Group transformed its Procurement function in order to achieve broader business objectives.
Peel Ports Group (PPG) engaged Efficio in 2014 to support its ambitious growth and group-wide procurement integration. The situation faced by Peel Ports was as follows:
- Implementing a highly efficient, agile and high-performing supply chain was important to meet Peel Ports’ ambitious growth targets and ensure high levels of customer service
- A high-performing Group Procurement function was required to improve supply chain resilience and agility, acting as a key contributor to group-wide operational efficiency improvement
- High procurement skill levels were required to source many complex business critical services, working closely with business stakeholders to re-engineer business processes and fundamentally challenge procurement strategy
Procurement has an important role to play in helping ensure that we develop the right strategy and delivery model.
With ambitious growth objectives and challenging cost reduction goals to meet, PPG engaged Efficio to transform their Procurement function and reshape their supply chain.
As Gary Parkinson, Deputy COO at PPG, explains: “When our client’s goods arrive, our job is only getting started. Operational excellence and supplier performance are both crucial to maintaining the levels of customer service we aspire to deliver.
“Procurement has an important role to play in helping ensure that we develop the right strategy and delivery model, we choose the right suppliers and then work with them to ensure performance is maintained and both parties work hard at driving continuous improvement and innovation – this was the goal of our transformation programme.”
The objective was to align the company’s supply chain strategy with the corporate objectives:
a) identify and deliver significant short-term cost-base reductions, and
b) transform the long-term capabilities of the supply chain.
The delivery was via three main work streams:
1. Strategic supply chain review
Working with Peel Ports in integrated teams, Efficio challenged the existing supply chain and operating model to identify which activities were best provided by the supply market. The teams defined a supply chain strategy that was more agile, flexible and able to scale up and down to meet the variable business demand.
Over 30 tender events were completed to select the right long-term partners across a variety of operational categories, using Efficio’s advanced sourcing tools and methodologies
2. Supplier Relationship Management (SRM)
Implementing a new SRM process for strategic suppliers to ensure active supplier performance management, and continuous improvement of safety, service, quality, cost and innovation. The process uses Efficio’s SRM toolkit and system to create a performance dashboard while identifying performance improvement projects through the use of lean methodologies
3. Establish an effective group-wide Procurement function
To support senior management, Efficio provided interim leadership to lead the transformation and integration into the PPG management teams. In two years Efficio achieved the following:
- Designed and implemented a new Group Target Operation Model – outlining roles, structures, policies, KPIs and objectives
- Implemented Efficio’s suite of best-practice tools and systems to provide a step-change in the procurement process capability, operating to modern best-practice methodologies and processes
- Enhanced the in-situ PPG P2P systems to improve on-time payment and process efficiency
The programme goals were significantly wider than just savings delivery and included: make-buy reviews; process re-engineering; improving security of supply; increasing resource flexibility; and securing investment in new assets.
However, these projects delivered savings against a baseline of between 4 and 16%. The projects and strategies have also transformed the core supply base with the following strategic business benefits:
- Better operational results – Efficio’s rigorous approach to the whole procurement process ensures clearer scopes, fit-for-purpose specifications, detailed transparent pricing models, highly structured negotiation with detailed cost-analysis, and well drafted contracts to mitigate risk. Sourcing teams fully engage end users in the initial strategy phase, and research the supply market to identify alternate products and approaches. We then introduce a disciplined requirements definition process, to ensure that the equipment, asset or service will be fit-for-purpose
- New equipment – increasing availability and reducing whole life cost – better fuel efficiency and reduced repair and maintenance costs
- Operational excellence – simplifying the supply chain and integrating best-in-class service providers, with significant new equipment, has moved large areas of the cost base from a fixed to a variable cost, with service/availability risk passed to the supplier. This has improved customer service levels and enabled PPG management and supervisors to focus on “managing the outputs”, not “managing the inputs” – all to the benefit of the customer
Procurement is now seen as a valued ‘business partner’, that is involved from the start in all strategy development and business planning.
As Gary Parkinson says: “Efficio bring positive challenge and analytical skills to help shape the business requirement, and then define innovative strategy and commercial models to meet the business goals.
“The improved procurement capabilities have significantly reduced key operational risks and Group Procurement is now better able to support PPG in its ambitious growth plans.”
The key elements of a transformation project
The Peel Ports business
Peel Ports Group (PPG) handles more than 70 million tons of cargo every year through its operations in England, Scotland and Ireland. It offers its customers integrated logistics solutions, leveraging its network of operations across the UK. Peel Ports is a part of the Peel Group, a company with £5 billion of assets and 5,000 employees.
As well as providing its many customers with world-class import and export facilities, PPG is committed to leveraging its unique infrastructure network to reduce road traffic congestion and assist its long-term customers in fulfilling their carbon-emission reduction targets.
Two key assets in this strategy are:
- The planned deep-water container terminal, Liverpool2 at the Port of Liverpool
- The Manchester Ship Canal, which PPG also owns and operates
Gary Hodgson, Chief Operating Officer, sums up Peel’s mission as: “We help enable our customers’ growth through game-changing logistics solutions.”
Liverpool2 – Europe’s first semi-automated container terminal
When Liverpool2 opens in 2016, it will be the North West’s first deep-water container terminal and the most centrally located in the UK. It has the capability of handling the majority of deep-sea container vessels in the global fleet. It will be Europe’s first semi-automated container terminal, one of the most operationally efficient and modern terminals in Europe, with eight Ship-to-Shore (STS) cranes and 22 Cantilever Rail Mounted Gantry (CRMG) cranes.
Liverpool is at the heart of the UK, and has excellent multi-modal connections with 10 motorways within 10 miles of Liverpool2 and 10 rail linked terminals. This provides a strong service differentiation for shipping lines, connecting global freight services directly with the heart of the UK, Scotland and Ireland.
Leveraging the supply network to take freight off the road
The Manchester Ship Canal is a unique inland waterway connected to the Port of Liverpool, enabling freight to be cross-docked and transported into the heart of Manchester without touching the road network.
Britain’s roads are some of the most congested in Europe. PPG is committed to leveraging the Port of Liverpool and the Manchester Ship Canal to provide an alternative shipping method and take freight off the road – a commitment that will only be enhanced by the new Liverpool2 deep-water container terminal.