INSIGHT Purchasing driven by experience
In 2010 Rivco implemented a purchasing programme to identify and create a business improvement plan. Claire Edwards visited the UK distributor of rivets, rivet nuts and tooling, to find out what the purchasing programme entailed and how it has contributed to Rivco achieving its highest revenue to date.
W
hen he arrived at Rivco, Steve Auld, managing director, brought an altogether new approach to the distributor’s purchasing process. “It was a classic case of within a small business everybody did
everything,” explains Steve. “When I first came to Rivco all staff were responsible for sales and purchasing of the products they individually sold.” It was becoming harder for the sales team to split their time between sales and purchasing responsibilities and potential difficulties were arising. “I couldn’t see how we were going to achieve a consolidated view on preferred suppliers as ultimately it was down to an individual’s discretion. Managing and generating the appropriate gross earnings from a sales order also became difficult.” The solution was to appoint Andrea Allen as purchasing
manager. Already a member of the Rivco sales team, Andrea had been working for the company for 17 years and had a wealth of experience in the rivet industry. “Andrea is somebody that is self-motivated and has a natural interest and understanding of the products we sell,” says Steve. “Despite not having any previous purchasing experience it is her knowledge and success that has added a significant amount to Rivco’s gross margins – in the time she’s held the role – and her appointment was the catalyst for implementing a purchasing programme.”
“ It’s a case of reading the market and understanding when the product is in demand…”
Rivco’s purchasing programme contained purchasing
objectives to aggregate and concentrate its spending power to support relevant areas, such as ensuring purchase orders were placed with approved manufacturers; and realising best margins by buying product direct from approved manufacturers – not from other distributors. This business improvement plan enabled Rivco to have the working capital available to fund stock and sales growth. Steve explains: “We created a framework that identified stock control measures by identifying minimums and maximums of stock levels required. We also needed to improve our cash management within the company by collecting money quicker and making sure we sold to credible customers in the first place. Any spending that was not contributing to the business was stopped and we gained structure within our newly created purchasing department.”
62 Fastener + Fixing Magazine • Issue 88 July 2014
Together with Steve, Andrea was keen for a structured department, designing a purchasing replenishment document that was available at set times for review, which began to take into account any stock that dropped below minimum levels. The review process started to enable Andrea to classify Rivco’s products and chosen manufacturers. “Classifying products to create preferred and non-preferred ranges was not straightforward,” says Andrea. “Usually a business would classify these ranges by the volume they sold. However, at Rivco we sell quite a lot of non-preferred items because we’re the only ones that stock them, so in the end it was sensible to make the decision based on our manufacturers’ capabilities.” The next stage was to introduce 1st
, 2nd and 3rd tier suppliers –
something that had not previously been done at Rivco. “The selection of suppliers is driven by Andrea’s knowledge,” explains Steve. “Andrea developed a list of our suppliers according to stock close to the UK, stock within Europe, or maybe even stock within the UK.” Rivco now looks to achieve 95% of purchases from prime sources – a criteria that Andrea has been very successful at achieving. “As far as I’m concerned, if I’m doing my job properly, then I’m freeing the sales department to sell with the confidence that we have products in stock,” comments Andrea. Rivco also has the benefits of a European warehouse. Andrea explains: “We anticipate the short fall on the 1st
tier
manufacturers and we try to fill the gaps through our European supply chain, which enables us to get stock from our principle manufacturers on a 3-4 day delivery basis. It’s pure continuity of supply, selling a part made from our 1st
tier manufacturers,
which means our customers know that when they ring us we will have the products in stock.” Rivco also has the ability to identify market trends and
broaden its product ranges. “The benefits of having a close relationship between the sales, purchasing and account departments means I can overhear the sales team on the phone and when they are being asked for specific products – even if we don’t currently stock it,” explains Andrea. “We’re always looking for new business and to expand our product ranges, but we have to be sensible. It’s a case of reading the market and understanding when the product is in demand within the market.” As a result of this close working relationship, Rivco has recently added quad nuts and jack nuts to its ever growing specialised product range. It is clear that there is a new approach and ideas to Rivco, with a simple message: 'Making it easy for customers to buy products', and the purchasing programme has gone a long way to support this. In the future Rivco will continue to concentrate on customer experience with a new website in development, which will enable customers to log on and check Rivco’s stock levels. “We’re bringing in new, different ideas that all started with implementing the purchasing programme to maintain confidence, quality and consistent pricing,” says Steve “We also want our customers to know that we will continue to go to great lengths to help get the products and assistance they require.”
www.rivco.co.uk
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