De La Rue is a 200-year old company, famous globally for printing currency notes and postage stamps. It’s been in the cash machinery business for over 40 years, and over time has acquired many businesses around the world. Until recently, these were run in isolation, with multiple systems and suppliers and no global purchasing. George Hadley was head hunted two years ago to bring strategic change to De La Rue’s manufacturing and supply chains.
‘There are few edges between manufacturing, procurement and supply chain – they are all supply chain processes,’ says Hadley. ‘People tend to tinker with discrete elements like procurement, when what’s really needed is to step back and look at the whole situation. Like it or not, 10-year old strategies and philosophies will not cut it – you have to look at the needs of the business now.
‘You need a long-term strategy, but most of managing a business is really about managing the supply chain – it’s the crucial driver of profitability. If you can take several million out of supply chain costs it goes directly to the bottom line. That’s equivalent to a lot of additional sales to customers.
‘But cost cutting alone isn’t enough. Yes, you must be lean, mean and efficient but you still need innovation and strategy,’ Hadley adds.
‘We have to see the total cost of the supply chain. Real solutions might not lie in buying at the lowest piece prices around the world. If, for example, I can buy four modules instead of 2000 components, I may be paying more than the material cost alone but I’ve only got four imports to manage with my suppliers managing inventory through consignment stocking to my hubs for final test, configuration and distribution. These hubs are located in the continents where sales are, say, China, Europe and North America, with product being shipped direct from suppliers to these configuration/distribution hubs. The hubs are the new factories.’
But Hadley cautions against the Nike model whereby everything but design and marketing is outsourced. ‘Especially where intellectual property is concerned, you need much more control. And as always with outsourcing, you must select your partners with care. They are an extension of your own business, they are integrated with your supply chain and your communications and they have to be aligned ethically, strategically and technically. You don’t want nasty surprises such as suppliers employing under-age workers or using unsafe practices. That will damage the brand and you must work with suppliers that have a proper ethical manner both toward your company and toward their workforce.’
The lesson, says Hadley, is not to let sourcing be done by third parties. ‘You must get your own people on the ground and take time,’ he says. ‘De La Rue took a year to select seven suppliers in Asia, so these are not overnight decisions. We made a lot of visits, we shortlisted, we developed acceptance criteria and a generic strategic alliance contract. It’s crucial that everyone knows what is expected – what the supplier can expect in terms of communication, information and support as well as what you can get from the supplier.
‘A true partnership will also cover disaster recovery, the environment, health and safety and annual audits. It’s not just a financial thing,’ he adds.
De La Rue has set up an international project office outside Shanghai, staffed by Chinese nationals. Teams of engineers, buyers and administrators manage suppliers on an everyday basis, backed by a small team that flies out every month. Hadley notes wryly that a good corporate business deal with airlines and travel agents is a must.
He has also introduced commodity purchasing management at the global scale, which can be highly effective.
- George Hadley graduated in Engineering and Materials and started his career at Ford Motor Company, which sponsored him through the Cranfield MBA. Posts included working in global procurement for Ford of Europe Powertrain and leading task forces supporting, or even temporarily running, problem suppliers.
- Subsequent posts included a technical directorship at Thyssen, setting up a large robotic welding plant, instilling lean manufacturing principles in the seat belt operations of Allied Signal, working in the supply chain for Cummins Engines in the UK and US, and serving as business excellence director for Perkins Engines, bringing parent Caterpillar’s US management culture to the UK business.
- Leaving automotive, Hadley became vp global operations at ABB’s metering and instruments group where he developed many of the ideas to do with global front-to-back supply chain management he is now applying at De La Rue.