MBEL streamlining plan axes 1,000 UK suppliers_2
19 July 2012
Mitsui Babcock Energy Ltd, a utility boilermaker for the power industry, plans to cut its UK supplier base by two-thirds within the next two years.
Mitsui Babcock Energy Ltd, a utility boilermaker for the power industry, plans to cut its UK supplier base by two-thirds within the next two years.
David Hawkins, procurement director at MBEL, said the company is seeking to cut its 1,500 UK suppliers to fewer than 500 so-called “active” suppliers by 2001. “Reducing our supplier base will give us more global flexibility and reduce risk,” said Hawkins at an MBEL supplier conference last month. The cuts are part of a move to streamline the company’s operations in western Europe as it expands throughout Asia and Africa. “We operate effectively with about 40 per cent of our European suppliers, so we are refining those established bases. But in countries like India and China our supplier list is rapidly growing, so it balances out,” said Hawkins. The company has 2,500 suppliers globally, 700 of which are active. In 1995, out of 3,500 suppliers, only 65 were global. By 1999, this had grown to 1,000. As part of the move to cut its supply base, MBEL has been focusing on developing strategic alliances or long-term partnerships. During the past two years, it has set up 25 alliances with major equipment suppliers for products ranging from basic castings, nuts and bolts to high-level processing equipment. However, Hawkins said that getting internal management and suppliers to accept the need for partnerships was a “hard sell”. “In this bespoke manufacturing industry, the immediate reaction was that there was no place for them,” he said. “There was a feeling that partnerships were too long-term, rigid and could become like a marriage. There is a fear of that in a market like ours.” This fear was fuelled by the large amount of risk MBEL was carrying in its supply chain. “Around 70 per cent of our contracts are placed within our supply chain. Even in manufacturing, most companies have a figure of about 50 per cent,” said Hawkins. Last year, Svedala Grinding, a US coal-pulverising mill manufacturer that has supplied MBEL for 10 years, entered an alliance with the company. The £25 million contract was the largest MBEL had issued to one supplier. Svedala had initial fears about revealing confidential cost and performance information. “MBEL needed to understand that we were out to make a reasonable profit,” a spokesperson said. However, the relationship will enable the supplier and MBEL to cut costs by 5 per cent a year by transferring greater project management responsibility to Svedala, he added. MBEL also plans to launch its first supplier handbook this year to improve buyer and supplier relations.
David Hawkins, procurement director at MBEL, said the company is seeking to cut its 1,500 UK suppliers to fewer than 500 so-called “active” suppliers by 2001. “Reducing our supplier base will give us more global flexibility and reduce risk,” said Hawkins at an MBEL supplier conference last month. The cuts are part of a move to streamline the company’s operations in western Europe as it expands throughout Asia and Africa. “We operate effectively with about 40 per cent of our European suppliers, so we are refining those established bases. But in countries like India and China our supplier list is rapidly growing, so it balances out,” said Hawkins. The company has 2,500 suppliers globally, 700 of which are active. In 1995, out of 3,500 suppliers, only 65 were global. By 1999, this had grown to 1,000. As part of the move to cut its supply base, MBEL has been focusing on developing strategic alliances or long-term partnerships. During the past two years, it has set up 25 alliances with major equipment suppliers for products ranging from basic castings, nuts and bolts to high-level processing equipment. However, Hawkins said that getting internal management and suppliers to accept the need for partnerships was a “hard sell”. “In this bespoke manufacturing industry, the immediate reaction was that there was no place for them,” he said. “There was a feeling that partnerships were too long-term, rigid and could become like a marriage. There is a fear of that in a market like ours.” This fear was fuelled by the large amount of risk MBEL was carrying in its supply chain. “Around 70 per cent of our contracts are placed within our supply chain. Even in manufacturing, most companies have a figure of about 50 per cent,” said Hawkins. Last year, Svedala Grinding, a US coal-pulverising mill manufacturer that has supplied MBEL for 10 years, entered an alliance with the company. The £25 million contract was the largest MBEL had issued to one supplier. Svedala had initial fears about revealing confidential cost and performance information. “MBEL needed to understand that we were out to make a reasonable profit,” a spokesperson said. However, the relationship will enable the supplier and MBEL to cut costs by 5 per cent a year by transferring greater project management responsibility to Svedala, he added. MBEL also plans to launch its first supplier handbook this year to improve buyer and supplier relations.
