phased approach that initially focused onBritish American Tobacco’s top 14 endmarkets. These markets accounted for some70% of the total indirect expenditure.

The ResultBritish American Tobacco is now buyingmore efficiently by leveraging its professionalprocurement people, process and globalpresence for improved economies of scale.Having saved £64 million and a further £89million in the first two years of the program,the group has twice raised its five yearsavings target on overheads and indirectpurchases to the current figure of £400million per annum by the end of 2007.

How British American Tobaccoand Capgemini Worked TogetherBuilding long term shareholder value isBritish American Tobacco’s key goal.This is delivered by growingbrands, new productdevelopment,

The SituationContinuously improving productivity helpsBritish American Tobacco to invest in brandsand secure earnings growth. To remaincompetitive, the group sought reducedcomplexity and costs across its entire supplychain. Two years ago, it announced acommitment to reduce annual overheads andindirect costs by an initial target of £200 millionper annum by the end of 2007.

The SolutionHistorically, British American Tobacco hadmanaged indirect procurement activities in itsend-markets, each with dramatically varyinglevels of maturity. Introducing globalconsistency across its organization was a keyaspect in delivering the aggressive targets.Integrating and implementing a common “bestpractice” organizational set up, processes,policy and a single instance procurementsystem within its ERP environment wouldoptimize supply chain performance, enable thereduction of indirect spend and ensurecompliance. Capgemini was entrusted to helpthe company steer the program anda joint team optedfor a

in collaboration with

5-Year Procurement Targetat British American Tobacco

Consulting services from Capgemini yields quick-wins, encouraging the Group to raise the bar

“It’s a major change activityadding millions to the bottom line

that needed best practicematerials and people.”

Geoff Wells,

Global Indirect Programme Manager,

British American Tobacco

Capgemini UKManufacturing, Retail & TransportConsulting ServicesTransformation ConsultingPurchasing TransformationSupply Chain Management

In collaboration with

Approved by: Geoff Wells, Indirects Programme Manager, British American Tobacco Richard Todman, Managing Consultant, Capgemini

productivity improvements and embeddingcorporate social responsibility. The grouphas 87 factories in 66 countries, andmarkets nearly 300 brands in over 180countries.

Productivity is an important driver for theeffective use of cash and other resources.Through the 1990s, the group had steadilyintroduced measures to buy direct materialsmore efficiently and leverage its globalpresence to achieve economies of scale. Atransformation program was launched in2003 to find cost reductions in overheadsand indirect procurement (indirect being anyexpenditure other than ingredients, plant orlabor) and make the most of BritishAmerican Tobacco’s buying power.

A joint team was established withstakeholders and subject matter experts fromBritish American Tobacco and Capgemini todevelop a plan. After a detailed study, theteam recommended a phased approach,starting initially with the top 14 end markets.

The program was to encompass both MROand indirect commodities. The team set outto implement an indirect procurementcapability and embed a new way of workingthroughout British American Tobacco’s localoperations. This was achieved by aligningstrategies, policies and processes andimplementing SAP Supplier RelationshipManagement (SRM) in larger markets. Theteam recommended progress across five workstreams: process, people, commercial, changemanagement and technology.

Each stream was led by a senior BritishAmerican Tobacco manager with experienceof the organization and its procurementfunction. Capgemini consultants wereselected on the basis of deep contentknowledge and broad experience. Thiscombination facilitated best in class solutionswhich were aligned to British AmericanTobacco’s strategy.

Capgemini used its process redesignmethodology with extensive research, currentstate analysis and close collaboration to ensurewidespread buy in. The team developed anend to end procurement process from businessplanning and budgeting to strategic sourcing,purchase to pay, performance tracking andknowledge management. Procurementprocesses and systems were fully integrated

Capgemini, one of the world’s foremost

providers of Consulting, Technology and Outsourcing services, has a uniqueway of working with its clients, called the Collaborative Business Experience.

Backed by over three decades of industryand service experience, the CollaborativeBusiness Experience is designed to help our clients achieve better, faster,more sustainable results through seamless access to our network of world-leading technology partners and

collaboration-focused methods and tools.Through commitment to mutual successand the achievement of tangible value,we help businesses implement growthstrategies, leverage technology, and thrivethrough the power of collaboration.

Capgemini employs approximately 61,000people worldwide and reported 2005global revenues of 6.954 billion euros.

More information about our services, offices and research is available atwww.capgemini.com

About Capgemini and the Collaborative Business Experience

the way we do it

Copyright ©2006 Capgemini. No part of this document may be modified, deleted orexpanded by any process or means without prior written permission from Capgemini.

within the group’s ERP environment tooptimize supply chain performance.

However, it is one thing to define commonstandards, systems and best practices. It isquite another to move these to anoperational level and embed them at global,regional and local levels. At British AmericanTobacco, the issue was complicated by thebreadth and diversity of markets and therelative maturity of the procurement functionwithin each.

The delivery of annualized savings targetswas accelerated in all the top end marketsthrough detailed change readinessassessments, rapid deployment of localprogram teams, procurement organization setup, new procurement policies and processes,together with the implementation of SAPSupplier Relationship Management (SRM).

Savings of £64 million in 2003 and a further£89 million in 2004 prompted BritishAmerican Tobacco to raise its five yearsavings target to £400 million by the end of2007. The group is now focusing on evengreater challenges in the next 30 large

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markets. Here, procurement functions areless developed and implementation of SRMmay not be appropriate. The deploymentwill focus on comprehensive stakeholdercommunications, targeted training ofprocurement staff and the introduction ofrobust policies and procedures.

Simultaneously, the program is now openingup opportunities to review “above market”and regional organizational structures andevaluate a “hub and spoke” model. Althoughthere are challenges, the approach mayinclude the introduction of shared services tostreamline internal costs.

Successful long-term programs of thismagnitude rely on organizational alignment,delivery of agreed targets, an ability tomaintain relevance as company goals evolveand a high degree of ongoing changemanagement effort. Effective collaborationwith many diverse stakeholders is the key tosuccess. Through partnership withCapgemini, British American Tobaccoexperienced the Collaborative BusinessExperience and understands how it hashelped the Group to deliver on its promise ofstrategic productivity improvements.