BAT hopes to save £800m

Supply Management, Mar 13, 2008 by Kanter, Jake

[Strategy]

Cigarette manufacturer British American Tobacco (BAT) aims to save £800 million over the next five years on IT, supply chain and procurement costs.

The target was revealed after the firm announced in its preliminary results last month that it had saved £1 billion in the past five years. It said it had made the savings by centralising its procurement function and simplifying supply chain operations.

The firm cut the number of its suppliers and made the packaging materials of its cigarette brands, such as Lucky Strike, less complex. Centralised purchasing also allowed the company to increase its buying power and secure better deals.

It saved £177 million through its supply chain in 2007. Jan Du Plessis, chairman of SAT, said some of the savings would be reinvested in the business, maintaining its research and development projects.

A spokeswoman for BAT added the easy savings had been made and the greater challenges were to come. "We've achieved what we set out to do and are a happier, leaner machine, but the harder savings will have to be driven as part of our new five-year programme," she told SM.

The firm hopes its new IT system will integrate the IT functions of its back-offices worldwide and keep costs low until 2012.

Jake Kanter

jake.kanter@supplymanagement.com