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Thomas Cook Merger and Acquisition Procurement Integration at Thomas Cook PLC
Thomas Cook Merger and Acquisition Procurement Integration at Thomas Cook PLC
Thomas Cook Merger and Acquisition Procurement Integration at Thomas Cook PLC
Thomas Cook Merger and Acquisition Procurement Integration at Thomas Cook PLC
Thomas Cook Merger and Acquisition Procurement Integration at Thomas Cook PLC
Thomas Cook Merger and Acquisition Procurement Integration at Thomas Cook PLC
Thomas Cook Merger and Acquisition Procurement Integration at Thomas Cook PLC
Thomas Cook Merger and Acquisition Procurement Integration at Thomas Cook PLC
Thomas Cook Merger and Acquisition Procurement Integration at Thomas Cook PLC
Thomas Cook Merger and Acquisition Procurement Integration at Thomas Cook PLC
Thomas Cook Merger and Acquisition Procurement Integration at Thomas Cook PLC
Thomas Cook Merger and Acquisition Procurement Integration at Thomas Cook PLC
Thomas Cook Merger and Acquisition Procurement Integration at Thomas Cook PLC
Thomas Cook Merger and Acquisition Procurement Integration at Thomas Cook PLC
Thomas Cook Merger and Acquisition Procurement Integration at Thomas Cook PLC
Thomas Cook Merger and Acquisition Procurement Integration at Thomas Cook PLC
Thomas Cook Merger and Acquisition Procurement Integration at Thomas Cook PLC
Thomas Cook Merger and Acquisition Procurement Integration at Thomas Cook PLC
Thomas Cook Merger and Acquisition Procurement Integration at Thomas Cook PLC
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Thomas Cook Merger and Acquisition Procurement Integration at Thomas Cook PLC

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IBX Capgemini Executive Summit …

IBX Capgemini Executive Summit
Day 2 - October 8th, 2010

13:45 to 14:30 Merger and Acquisition: Procurement Integration at Thomas Cook AG

Overview:

In a prcenter.de article titled "CPO Dialog Procurement Excellence: Chief Buyer Exchange Globalization Strategies," Thomas Cook CPO Nikolaus Kirner made the following statement regarding the introduction of an eSourcing strategy as a "CHANGE" process; "If the coworkers do not pull-along, it can happen easily that the hoped for efficiency gains are missing." Kirner, went on to report, "how he transferred" the company's coworkers to an eSourcing integrated platform, maintaining a high level of motivation."

How important is effective internal collaboration in terms of motivating coworkers during an M&A integration? Just ask a candy company in the U.S. mid-west. As the manufacturer of a number of leading brands, this organization grew dramatically in a very short period of time through a series of acquisitions.

Unfortunately, the degree of collaboration between the different purchasing organizations was not clearly established from the beginning. This only served to fuel rather than douse the internal division fires resulting in both a practical and operational lack of cohesiveness and coordination. The end result was a “territorial” struggle that manifested itself in a divided supply base. This is hardly the ideal environment for a successful consolidation.

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  • 1. Merger and Acquisition: Procurement Integration at Thomas Cook PLC
  • 2. Introduction to Thomas Cook Page 2 Thomas Cook Group plc
  • 3. Six travel facts you didn’t know about Thomas Cook 1 Thomas Cook personally conducted the first round-the-world tour in 1872/73. The tour took 222 days and cost £300 1 2 In the late 19th century the Nile was known as "Cook's Canal" 4 3 Thomas Cook published its first winter sports brochure in 1908. It did not feature skiing! 2 4 Thomas Cook's monthly European Rail Timetable, still published today, was first issued in 1873 5 5 Thomas Cook started a register of people interested in travelling to the moon in 1950 6 For half a century (1889-1939), Thomas Cook owned a 3 6 funicular railway at the top of Mount Vesuvius Thomas Cook Group plc
  • 4. Thomas Cook is the 2nd largest travel Group worldwide 1 Revenue £ 9.3 billion 2 EBIT (margin) £ 415 million (4.5%) 3 Source markets 21 4 Customers 22 million 5 Retail outlets 3,200 6 Aircraft 94 7 Destinations 2,000 8 Employees 31,000 Thomas Cook Group plc
  • 5. We are present in 21 source markets Canada UK Germany France Poland Sweden US Ireland Austria Belgium Hungary Norway Switzerland Netherlands Czech Rep. Finland Slovakia Denmark Egypt India Note: 1Sweden Norway, Finland, Denmark Lebanon Thomas Cook Group plc
  • 6. We have a leading portfolio of travel brands Global umbrella brand Major local brands Other local brands Thomas Cook Group plc
  • 7. We’ve developed a strategy for long term growth Vision Strategic objectives Strengthening our business and investing for growth Growth drivers Maximise Become a Become Capture value of leading the leading growth and mainstream independent travel-related value through travel provider financial M&A and services partnerships provider Enablers Product Technology Customer insight Brands Financial rigour Values P R O U D Pioneering our Results Obsessed with United as one team Driving robust future orientated customer service decisions Note: Version shown is strategy as of FY09, this has not materially changed since 2007 Thomas Cook Group plc
  • 8. Main acquisitions completed June 2007 – Sep 2010 Acquisitions¹ Country Date Neckermann Urlaubswelten Germany May 08 Mainstream Oeger Tours Germany Sep 10 Travel: Jet Tours France Aug 08 Independent Hotels4U.com UK Feb 08 Travel Elegant Resorts UK Apr 08 TriWest Canada Aug 08 Med Hotels UK Feb 09 Gold Medal UK Apr 09 Emerging Travel Plus Czech Aug 07 markets TC Egypt Egypt/ ME Apr 08 TC India India Mar - Jul 08 Note: ¹ Other acquisitions completed: Wasteels, Airtrack, neckermann.de, urlaub.de; 65% of Iberoservice acquired in 2008 however not included as an acquisition Thomas Cook Group plc
  • 9. Procurement Transformation ‘a global category management approach giving a flexible operating model for a growing organisation’ Page 9 Thomas Cook Group plc
  • 10. Large cost base for Procurement to challenge £8.9b Commission & Other £0.6b Commission/ Other • Greater control of distribution and commission rate reductions Fuel • Reduced agent costs in-destination Aviation excl. fuel Aviation and fuel £3.3b • Better buying of aviation services across the Group • Best practice sharing between airlines e.g. on fuel efficiency Accommodation costs £3.1b Accommodation • Better buying process and use of Group buying power • Co-ordination of activities and best practice sharing Other Opex Operating expenses £1.8b Personnel • Operating leverage; spread fixed costs over higher volumes • Adopt a common approach to airline, personnel, IT etc. FY 2009 Group Costs Cost of providing tourism services Operating expenses Thomas Cook Group plc
  • 11. Targets new group procurement function • Implementing a global category management organisation and processes • Realizing any bundling opportunity within the group • Use chances of global sourcing • Standardise within the group where ever appropriate • Reduce no. of suppliers substantially and deliver more value w. strategic partnerships • Implement a global supplier management to our strategic partners Leveraging our position through a world class procurement approach Thomas Cook Group plc
  • 12. What will change? •The move from a vertical BU Orientation to a Horizontal Group Orientation in relevant categories •Coordinated approach to strategy, demand management, category management, sourcing, SRM, contract management and business service and support Current Procurement Structure Scandana North Group UK & I Germany Condor East West via America Vertical BU Orientation – BUs each perform category Strategy & Strategy & Strategy & Direction Direction Tyres Strategy & Direction Strategy & Direction Strategy & Direction Direction Tyres Strategy & Direction management process, have Tyres Tyres Tyres Tyres Tyres Spend & independent strategies, varying As Is Spend & Spend & Spend & Spend & Spend & Spend & Spend & Spend & Spend & Spend & Spend & No Market Intelligence Market Intelligence Intelligence Market Market Intelligence Market Market Intelligence Market Market Intelligence Market Market Intelligence Intelligence Market sourcing procedures and execution Intelligence Intelligence Intelligence Intelligence Intelligence formal Tyres Tyres Group Tyres Category Category Commodity Tyres Category Tyres Category Tyres Category Category Commodity Tyres Category Commodity Mgt Commodity Commodity Commodity Commodity Purchasi Mgt Mgt Mgt Mgt Mgt Mgt Mgt Mgt Mgt Mgt Mgt Mgt Mgt ng Operational Operational Operational Operational Operational Operational Operational Operational Operational Operational Operational Operational Tyres Tyres Operational Operational Tyres Procurement Procurement Tyres Tyres Procurement Tyres Procurement Tyres Procurement Procurement Procurement Procurement Procurement Procurement Procurement Procurement Procurement Procurement Future Procurement Model Thomas Cook Procurement Group Group UK & I Germany East / West Etc. Supply CFO Proc Horizontal Group Orientation - Strategy & Strategy & Strategy & Direction Glbal Cat Mgr Direction Local Procurement Centrally led Group Procurement Direction IT Tyres Tyres Strategy, direction setting, To Be Strategy & Category B Direction Glbal Cat Mgr Category B Local Procurement TC Group Suppliers governance and decision making Marketing & Service Delivery Strategy & Glbal Cat Mgr Category C Direction Category C Traded Goods Local Procurement Business Demand & Requirements Page 12 Thomas Cook Group plc
  • 13. Procurements 3 Year Transformation Plan 2010 2011 2012 Procurement Organisation Design (Group & Local) Supplier Management Group Procurement Roles Filled Strategic Supplier Days Achieve Vision Best in Class Group Policies Defined & Agreed SRM Toolkit – UK Pilot Strategic Business Partners Group Procurement Vision, Plans & Policies Communicated Agreed Group Category Plan Centre of Excellence Stakeholder alignment (Group & Local) Top Talent Program Leading Edge Technology Category Landscape Defined Development Plans & Succession Planning Sourcing Teams seen as the Group Category Planning Defined Common Category Management Processes Norm Group Spend Analysis Complete Group E -Sourcing solution in Place Management of Strategic Suppliers Defined and Agreed Group Contract Management Solution Skills & Competency Assessments Improved Procurement Intranet Usage Common Target Setting Best in class realised On -line Group Savings Tracker in Place Common Procurement Benefits Tracked & Finance Sign of Obtained Processes across TC Design, Build Define & Implement Operating Set Vision Model Mobilise, Define, Design & Build Implement Refine Group Phase 1 Phase 2 Procurement 1 – Page 13 Thomas Cook Group plc
  • 14. We have started on the transformation journey……. The commonly agreed transformation map leads 2011 2010 Procurement towards its targets Status Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Organisation Complete -New Organisation in place In Progress -Clearly defined Roles & Responsibilities – Global v Local Systems -Group Wide Savings Tool Complete -Group Wide e-sourcing solution & Group Spend In Progress -Improved P2P platform in all markets Under Review -Group Wide Contracts Database Complete Processes -Group Procurement Guidelines & Policies in Place In Approval -Group Category Plans in Place In Progress -Group Cat Management defined In Progress -Common Processes in place Under Review People -Org chart & functions clearly defined & aligned In Progress -Define competency requirements In Progress -Full development program implemented Not Started In Progress -Implement common target setting Communication & Governance Stakeholder Engagement & Regular Meetings Page 14 Thomas Cook Group plc 14
  • 15. Supplier & Market Consolidation Page 15 Thomas Cook Group plc
  • 16. Procurement Integration Activities – Airline Synergies • 6 Airlines • UK Merger – Thomas Cook Airline & MyTravel Airlines in 2007/8 Initial Situation: • Condor merger talks with Air Berlin in 2008 • Regular individual cost cutting programmes but priority in each airline • Synergies realised in an opportunistic way • Best practice sharing Target • Use of group buying power • Supplier consolidation • Lead joint tenders for global catering supplier, in-flight entertainment etc Procurement • Joint negotiation for ground handling contracts Action • Supporting role in harmonising IT systems • Reduce hotel accommodation contracts for travel • Million pounds of savings (up to 40%) • Group Procurement Director part of Airline Synergy Board together with Airline CEOs Results • Agreed within project to centralise fuel, maintenance, ground handling under group procurement Page 16 Thomas Cook Group plc
  • 17. Procurement Integration Activities – IT Systems & Suppliers • More than 1100 IT Suppliers • >100 different desktop images Initial Situation: • >30 data centres • Approx 500 IT projects • Industrialise Infrastructure and deliver savings in excess of 25% Target • Reduce no of IT-suppliers by 50% • Deliver synergies with global suppliers • One managed global infrastructure tender incl; networks, data centres, desktops and service management Procurement • Global mobile tender Action • Supply chain quick-win initiative with common suppliers • Assessment of further offshoring opportunities • Shortlist of two global infrastructure providers forecasting >25% savings • New global contracts with Oracle, SAP, Microsoft Results • Started assessment of Application Management & Development outsourcing Page 17 Thomas Cook Group plc
  • 18. Procurement Integration Activities – Brochure Production • 55 printers producing Thomas Cook Brochures Initial Situation: • Various paper suppliers • Different paper quality, sizes etc • Reduce no of printers to 5-10 Target • Find single supplier for paper • Further standardise quality where feasible and useful • Tender paper volume to one single supplier Procurement • Organise strategic partner days to communicate strategy, drive innovation and seek proposals Action • Organise ‘look and feel’ board meetings to drive standardisation and downgrading of material • Global paper supplier delivered savings of 8% • Reduced no of printers to 16 as a first step Results • Drove out costs of up to 24% due to change of specification • Agreed on future global tender process Page 18 Thomas Cook Group plc
  • 19. Lessons Learnt after 12 months transformation • Create common vision and jointly develop strategy • Stick to your strategy but remain flexible • Do your stakeholder management • Communicate successes • Don’t underestimate cultural differences Page 19 Thomas Cook Group plc

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