Sourcing and Procurement Focus: Our Weekly Feature Article on Topics of Interest to Sourcing and Procurement Professionals or Related Supply Chain Functions  
 
 
  - April 8, 2008 -  

Procurement and Sourcing News: Procurement Improvements Help L’Oreal Weather the Commodity Price Storm

 
 

Lower Prices Come as a Result of Procurement Design, Says CPO Barbara Lavernos; the “Optimization of Procurement”

 
 

 

SCDigest Editorial Staff

SCDigest Says:
L’Oreal has centralized many purchasing functions, created seven regional sourcing centers, created a “lead buyer organization,” invested in procurement technology, and significantly expanded the amount of “co-development” work it does with suppliers.

Companies around the globe have been feeling the pinch of rising commodity prices, including oil and oil-based products such as plastics, agricultural products, metals and many more.

While there is only so much a company can do as prices for these supplies rise across the globe, savvy procurement can make a huge difference, as it apparently has for L’Oreal, the global cosmetics and beauty giant headquartered in Paris.

While facing the same challenges as manufacturers around the world in terms of supply cost, L’Oreal CEO Jean-Paul Agon credited the “optimization of procurement” as a key factor in how the company had been able to stay strongly profitable in the face of high energy and raw material prices.

That improvement comes under the leadership of Chief Procurement Officer Barbara Lavernos, who assumed the role in 2004.

“Cost savings are a consequence, not a starting point. They flow from the way you organize, the way you do things, from having the right people in purchasing and the right choice of suppliers,” she said. “The challenge is to find new ways to make savings without hurting the profitability of our suppliers, so that they continue to invest in innovation.”

It sure sounds like that approach has been working.

“Because of our changes we have achieved great savings that have offset the impact of these commodity price rises,” Lavernos added. “Our budget for 2008 hasn’t increased, and even in areas like packaging, where things have been tough, we have many potential opportunities to reduce our costs this year.”

(Sourcing and Procurement Article - Continued Below)

 

 
 
CATEGORY SPONSOR: SOFTEON

 

 
 

That’s quite an accomplishment in this environment.

L’Oreal has centralized many purchasing functions, created seven regional sourcing centers, created a “lead buyer organization,” invested in procurement technology, and significantly expanded the amount of “co-development” work it does with suppliers.

Is the base way to achieve reduced supply costs through “procurement architecture?” What are you thoughts on Lavernos’ comments? Let us know your thoughts at the Feedback button below?

 
     
Send an Email
   
     
.