Colgate-Palmolive restructures supply chain to cut costs

Filed in archive News on April 3, 2006

A new deal for big IBM: the new contract is with Colgate

According to Cosmetics Design Europe, personal care and consumer goods giant Colgate-Palmolive has upgraded its procurement system for materials and services in a move that is estimated will save the company an estimated $30m by 2008.

The company has signed a seven-year agreement with IBM that will extend the services worldwide and also provide accounts payable services for Europe and North America.
The investment is part of Colgate's current efficiency drive on raw and packaging material purchases, which is now extended to all goods and services.

According to the company, the savings, which will come about from purchasing and accounts payable changes, 'are a meaningful part of the overall four-year restructuring and business building plan' which were first announced back in December 2004.

The total projected savings for the entire programme aim to cut costs in the range of $250 - $350m after tax.

The company implemented its cost cutting programme in the face of stiff competition on the global market from the likes of Unilever and P&G, as well as rising material costs.

Those market conditions have caused profits to tumble, leading to the implementation of a cost-saving plan that will eventually that will eventually see the closure of a third of its global manufacturing plants and the loss of 4,000 jobs.

The agreement with IBM will see the introduction of purchasing tools developed for its global SAP systems and global purchasing carried out both by internal Colgate procurement teams and IBM specialists.



Colgate says that this arrangement will help consolidate its purchasing expertise for all of its global locations.

The agreement means that IBM will also manage Colgate's accounts payable function in North America and Europe, streamlining this process and generating additional savings.

Ian Cook, Colgate COO said that the agreement would provide the company with the "mechanism to increase the efficiency of our purchasing and accounts payable, allowing our subsidiaries to increase their focus on serving consumers and the trade."