Heathrow Airport has managed to save millions with a supplier through a novel approach to working with them. Speaking to the Chartered Institute of Procurement Supply Annual Conference in London, Ian Ballentine, executive procurement director at Heathrow explained how this was done.
Heathrow had agreed a contract extension and profit margin with the company in return for ‘complete visibility of everything’ that ultimately led to savings of £12 million.
Speaking at the CIPS Annual Conference in London, Ballentine said: “We did £55m of business with this company. The deal was going to run until 2018. They are a really key supplier to the service we provide.”
Heathrow had reviewed the contract with the supplier and agreed that the supplier could ‘keep your profit for the length of the contract’ and that Heathrow would lock in until 2023 but between them they would drill down into costs.
“We went through the sub contracts and took £10m out of the contract, and they still made their profit,” said Ballentine. “Last year we shaved £2m off – we took £1m each.
“Their head of business is now one of our directors, yet he still works for them. We trust them as an organisation to work for us.”
Ballentine also revealed that Heathrow has 45 strategic suppliers. He said it was critical to use this approach only with certain suppliers and that this can only work if it is supported by the rest of the business.
“It’s a journey you can go on but don’t think it’s a switch you can pull. Partnership is really tough,” he said.
“Make sure the value is there and do it wholeheartedly.”
Ballentine said they were expecting a government decision on a potential third runway at Heathrow on Tuesday, 25 October.
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