One of the world’s largest building material distributors uses PROACTIS to achieve greater spend control and visibility.
Wolseley UK Ltd is the UK operating subsidiary of Wolseley PLC, one of the largest distributors of building products in the world. Wolseley UK operates an extensive nationwide network of over 1,500 branches under brands such as Plumb Center, Build Center, Parts Center, Pipe Center, Drain Center, Climate Center, Electric Center, BCG, Unifix, and others.
Wolseley UK (including Ireland) has revenues of over £3 billion, an employee base of over 13,000 and an annual indirect purchasing expenditure of over £200 million.
When all of Wolseley's UK businesses were combined into Wolseley UK, the approach to the procurement of indirect products and services was anything but automated or consistent. Often, employees would simply find a supplier in the Yellow Pages, pick up the phone and order what they wanted. Finance did not know what commitments had been made until the invoice arrived. Purchasing had virtually no ability to consolidate or analyse what was bought or from whom. Maverick spending was the rule, rather than exception.
When Zoe Matsell joined Wolesley as Head of Indirect Procurement, it was clear a more structured approach was needed: "We had little ability to control when or where money was being spent - the process was almost completely without governance."
An audit of the indirect Procurement process performed by KPMG clarified the situation, identified the risks to the company, and outlined the opportunities a properly controlled process would present. Based on that information, Matsell summarised the business case for an electronic procurement system and gained management authorisation to proceed.
Wolseley first looked at the capabilities of their current ERP system (Oracle) as well as those of their planned future ERP system (SAP). While both supported direct product procurement, neither provided what was needed for indirect goods and services procurement - a very different process. After looking closely at several alternatives, Wolseley selected the PROACTIS purchasing solution as the path forward.
"There were a number of reasons why we picked PROACTIS," says Matsell. "We could see that it was well conceived and provided all the capabilities we needed. The workflow, authorisation rules, cost allocation methods, and other capabilities were all very configurable, so we knew we could tailor it to our organisation. Just as importantly, it was clearly an intuitive system we felt our employees would be willing to adopt and use."
Another advantage of PROACTIS was lower total cost of ownership. Because integration with existing financial systems was reasonably straightforward and no major customisation was required, the overall cost to deploy the system was lower than most of the others while providing greater capability.
Wolseley opted for PROACTIS subscription-based hosting, which aligned expenditures with the anticipated process savings. Using PROACTIS, Wolseley projected savings of over £2.5 million after system costs in the first three years, just as a result of improved governance and visibility.
Finally, Wolseley's people were impressed with how well PROACTIS understood their needs, and with the plan they developed for Wolseley's large-scale deployment.
It took only a few months to configure the system to match Wolseley's organisation and policies, then just three months to get the first department up and running. Full-scale roll-out proceeded from there. As of this writing, full deployment across 1,900+ users and 1,500+ locations is nearly complete. In addition to realising the control and consistency of process Matsell and the company were after, a number of functions have been streamlined, and visibility of purchase activity has taken a big leap forward.
The supplier base has been significantly reduced. Matsell's team consolidated the base of over 26,000 suppliers to just over 5,000 for setup in the new system. Though additional suppliers will be brought on board as needed, sourcing rules and PROACTIS controls will prevent uncontrolled rebuilding of that base.
Various PROACTIS features have been used to make it easy for employees to buy from preferred suppliers. For instance, PROACTIS 'punch-out' capabilities allow users buying stationary products to link directly from PROACTIS to the Lyreco website, select items using the shopping cart, and pull the information back into PROACTIS for normal processing. Such capabilities make buying through the new system as easy as it was before, while applying all the desired controls. Another benefit of the punch-out approach is that it completely eliminates the need for catalogue management - a big benefit within the Purchasing department.
The load on the Accounts Payable function is now being reduced - and will be dramatically reduced when legacy procedures are fully eliminated - because the great majority of invoices are automatically matched to purchase orders already in the system, and exceptions are electronically routed to the originator for reconciliation. In addition, invoices are now being scanned using OCR technology to automate invoice entry.
Financial visibility is vastly improved. Before, Finance knew nothing about purchase commitments until invoices were received, approved and posted - sometimes months after the purchase was made. With PROACTIS, purchase commitments are visible as soon as items are ordered and an approved payment file is sent to the corporate finance system on a daily basis.
The other advantage of capturing all purchase activity electronically is that a detail history is now being accumulated. This information gives the Purchasing department the information they need for effective spend analysis, sourcing, and contract management.
In summarising her view of the PROACTIS solution, Matsell says: "PROACTIS has provided us with exactly the framework we needed to gain control and visibility of indirect spend across our 1,500+ locations - we're very happy with the results."