Preamble
I had no idea of what Category Management is until joining the French giant SUEZ (Degrémont by that time) back in 2005 as a Purchasing Manager for the Lebanese branch. My performance on the Tripoli Waste Water Treatment Plant in Lebanon made a clear contrast with the way procurement was handled at the French Head-Office, sourcing material worldwide and conducting aggressive negotiations leading to significant savings, also smashing the logistics costs by more than 80 to 90% by using the adequate shipping strategies. I was then designated as a Lead Buyer on this job, only 6 months after joining and in replacement of my Belgian colleague who had resigned to seek new ventures.
As a next step of the continued appreciation of my work, SUEZ took me to the wider area of the GCC countries, and Qatar in particular, as the "local buyer" for the just-won projects there, the Waste Water Treatment Plants of Lusail and Doha West where my additional efforts and my technical knowledge as an Engineer led to my designation as a Category Manager for the Group, worldwide.
My very first category assessment for power generators was cited as the example to be followed in terms of Category Management within SUEZ.
As a next step of the continued appreciation of my work, SUEZ took me to the wider area of the GCC countries, and Qatar in particular, as the "local buyer" for the just-won projects there, the Waste Water Treatment Plants of Lusail and Doha West where my additional efforts and my technical knowledge as an Engineer led to my designation as a Category Manager for the Group, worldwide.
My very first category assessment for power generators was cited as the example to be followed in terms of Category Management within SUEZ.
Category 1: Electric Cable
I have intoduced the below to Suez when purchasing electric cables:
Copper hedging
Like currency hedging, copper hedging allowed to fix the price of copper for the period of the project.
RFQs based on theoretical BOQs were sent to cable manufacturers, offers compared, negotiations finalized and a Letter of Intent issued and signed by both parties, covered by a blanket PO in the system to enable payments. The manufacturer was then given an advance amount of roughly 55% of the theoretical PO amount in order to buy the copper and return a certificate of purchase.
Tons of the 8mm copper rod, which constitutes the basis of any copper conductor used in cables were booked at the market price.
Like currency hedging, copper hedging allowed to fix the price of copper for the period of the project.
RFQs based on theoretical BOQs were sent to cable manufacturers, offers compared, negotiations finalized and a Letter of Intent issued and signed by both parties, covered by a blanket PO in the system to enable payments. The manufacturer was then given an advance amount of roughly 55% of the theoretical PO amount in order to buy the copper and return a certificate of purchase.
Tons of the 8mm copper rod, which constitutes the basis of any copper conductor used in cables were booked at the market price.
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Cut length
The projects were Design-Build and designers never calculate the individual lengths of the electric cables.
The BOQ used to place a PO to the cable manufacturer, was given to the buyers with total quantities per each section, and the selected vendor used to ship standard drum lengths to site. This resulted in a lot of unused lengths, especially cables laid on cable trays should have no splices.
I had then asked the site teams to provide the cut lengths for Medium Voltage and Feeder cables, taught the buyers to order such lengths, and the vendors to tag them for identification on site.
The projects were Design-Build and designers never calculate the individual lengths of the electric cables.
The BOQ used to place a PO to the cable manufacturer, was given to the buyers with total quantities per each section, and the selected vendor used to ship standard drum lengths to site. This resulted in a lot of unused lengths, especially cables laid on cable trays should have no splices.
I had then asked the site teams to provide the cut lengths for Medium Voltage and Feeder cables, taught the buyers to order such lengths, and the vendors to tag them for identification on site.
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Local manufactures
Instead of ordering cables to the French contact of Nexans or Prysmian, I had routed the inquires to the local manufactures, regardless if these are part of the giant groups or independent. The proximity of the cable factory to the jobsite allowed to eliminate the costly maritime shipping since cable drums don't fit easily into containers; I had then restricted the transport to trucked deliveries. Such proximity also allowed to easily re-order missing lengths and to return the empty drums to the manufacturer at a good price, rather then selling these on site as scrap. |
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Joints and termination kits
The practice to purchase the cable joints from the cable manufacturer was standard before I ask the designers to separate those completely in the BOQs and the buyers to contact joints and kits manufacturers for procuring them.
It resulted in significantly lower prices obtained for such material and again, savings on transport, since such fittings were shipped directly to site instead of being grouped with the cables at the cable manufacturer place and stuffed in the same containers.
The practice to purchase the cable joints from the cable manufacturer was standard before I ask the designers to separate those completely in the BOQs and the buyers to contact joints and kits manufacturers for procuring them.
It resulted in significantly lower prices obtained for such material and again, savings on transport, since such fittings were shipped directly to site instead of being grouped with the cables at the cable manufacturer place and stuffed in the same containers.
Category 2: Distribution Transformers
My contribution to this category was mainly by setting the right transformers specifications in the Middle East where ONAN cooled and hermetic type oil distribution transformers are popular and local transformer manufacturers unknown to my French colleagues.
Electrical distribution within the plant constituted the main focus since SUEZ is a water treatment company; the main substation intended to feed the water treatment plant was always outside the scope of works.
The local manufacturers were mainly from Turkey, Lebanon and Saudi Arabia.
I carried out multiple factory visits and assessments of the manufacturers often re-visiting them to introduce them to more colleagues coming from abroad, since everyone wanted to "make sure" of the capacity of such new vendors.
Several orders were placed to them drastically reducing once more the shipping costs.
The proximity of the vendor to the construction site also allowed for fast and efficient repairs in case of a warranty claim or a damage during transport.
Electrical distribution within the plant constituted the main focus since SUEZ is a water treatment company; the main substation intended to feed the water treatment plant was always outside the scope of works.
The local manufacturers were mainly from Turkey, Lebanon and Saudi Arabia.
I carried out multiple factory visits and assessments of the manufacturers often re-visiting them to introduce them to more colleagues coming from abroad, since everyone wanted to "make sure" of the capacity of such new vendors.
Several orders were placed to them drastically reducing once more the shipping costs.
The proximity of the vendor to the construction site also allowed for fast and efficient repairs in case of a warranty claim or a damage during transport.
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Category 3: Generators and Cogeneration
I am describing in details my involvement under these complex installations when telling my engineering experience.
In terms of category management, this would be indeed my most successful achievement since the acquisition of each and every plant resulted in savings worth millions of euros to the company.
The overall purchasing margin under this category was somewhere in between 40 to 50% of the initially thought costs thanks mainly to the competition, the introduction of local assemblies of gensets, and the split of the machines from the remaining of the installations.
Thorough third party inspections had to be carried out often in multiple places or where the grouping of the different items was happening in order to ensure the materials meet the required quality.
Generating sets were factory tested using the testing facility of the manufacturer and witnessed by the Third Party.
The whole job was always given on turnkey basis to the local contractor who will fabricate the local items and provide the indigenous services, and not the gensets manufacturer. That was for sure the main change and source of savings.
In terms of category management, this would be indeed my most successful achievement since the acquisition of each and every plant resulted in savings worth millions of euros to the company.
The overall purchasing margin under this category was somewhere in between 40 to 50% of the initially thought costs thanks mainly to the competition, the introduction of local assemblies of gensets, and the split of the machines from the remaining of the installations.
Thorough third party inspections had to be carried out often in multiple places or where the grouping of the different items was happening in order to ensure the materials meet the required quality.
Generating sets were factory tested using the testing facility of the manufacturer and witnessed by the Third Party.
The whole job was always given on turnkey basis to the local contractor who will fabricate the local items and provide the indigenous services, and not the gensets manufacturer. That was for sure the main change and source of savings.
Why buying is selling
The biggest challenge I had to face under this category was in 2009, with the case of Al-Rusafa base load power plant, for the potable water plant of the same name located near the Iraqi capital.
Some misunderstanding had occurred with the client asking for a gas turbine to power up the plant and my colleagues from the tendering team having proposed a stand-by power house based on 1500RPM engines.
Something had to be done, since the proposed solution was not meeting the requirement and the gas turbine costs not less than twice the foreseen budget. I had then proposed to use medium speed reciprocating engines in order to keep the budget close to a stand-by power plant while beating the gas turbines technically. This is because the 24MW of load was in the favor of reciprocating engines, while gas turbines start to impose their superiority beyond 50-70MW.
Now the idea had to be confirmed with a solid quotation from a reputed vendor so it can be sold internally, within the company, and a comparison of the two solutions had to be submitted to the client for obtaining his approval on this major deviation.
Several meetings occurred with the selected vendor between Paris, London, Beirut, Cairo and Alexandria until the deal was made final and my colleagues from the technical department were fully convinced of the solution.
I had then prepared a long and detailed comparison between the two technologies which obtained the client approval and paved the way for the implementation of the solution based on 6Nos 1000RPM machines of 4MW each.
No doubt that buying is selling. A purchaser has two clients, one internal and one external.
Some misunderstanding had occurred with the client asking for a gas turbine to power up the plant and my colleagues from the tendering team having proposed a stand-by power house based on 1500RPM engines.
Something had to be done, since the proposed solution was not meeting the requirement and the gas turbine costs not less than twice the foreseen budget. I had then proposed to use medium speed reciprocating engines in order to keep the budget close to a stand-by power plant while beating the gas turbines technically. This is because the 24MW of load was in the favor of reciprocating engines, while gas turbines start to impose their superiority beyond 50-70MW.
Now the idea had to be confirmed with a solid quotation from a reputed vendor so it can be sold internally, within the company, and a comparison of the two solutions had to be submitted to the client for obtaining his approval on this major deviation.
Several meetings occurred with the selected vendor between Paris, London, Beirut, Cairo and Alexandria until the deal was made final and my colleagues from the technical department were fully convinced of the solution.
I had then prepared a long and detailed comparison between the two technologies which obtained the client approval and paved the way for the implementation of the solution based on 6Nos 1000RPM machines of 4MW each.
No doubt that buying is selling. A purchaser has two clients, one internal and one external.
Category 4: Sludge Incinerators
Team work
That was for sure quite a striking experience when my boss called me only a month after joining Degrémont Liban in 2005 to put the incinerator problem on the table. The sludge incinerator part of the larger Waste Water Treatment Plant of Tripoli in Lebanon was leading to a loss of a few million Euros if executed in-house by the available means of the company. Such incinerators are designed in the US, and it would indeed be too costly to mobilize teams from the US to Lebanon for building the two municipal sludge furnaces and their fume treatment system.
Many special steels were involved in the product design and none of them was available in Lebanon or nearby countries like Egypt and Turkey.
It required a lot of sourcing, initiatives, imagination and courage to engineer the solution which ended up with savings and 12% of net margin instead of the forecasted 30% loss.
I had received the precious support of two of my colleagues, Jean-Pierre and François for the specifications and drawings and David for issuing to me the BOQs of materials to be ordered. David also supervised the plant erection which meant a lot and was for sure a major element of the success, since the same trio who accepted to carry out the works locally was involved from beginning to end. The execution team could not blame the design, and the design team could not blame the procurement while my continued involvement during the construction phase closed the loop and procurement team was not going to blame any of the design or execution.
It was simply the perfect example of team work, the one that can be used academically.
Many special steels were involved in the product design and none of them was available in Lebanon or nearby countries like Egypt and Turkey.
It required a lot of sourcing, initiatives, imagination and courage to engineer the solution which ended up with savings and 12% of net margin instead of the forecasted 30% loss.
I had received the precious support of two of my colleagues, Jean-Pierre and François for the specifications and drawings and David for issuing to me the BOQs of materials to be ordered. David also supervised the plant erection which meant a lot and was for sure a major element of the success, since the same trio who accepted to carry out the works locally was involved from beginning to end. The execution team could not blame the design, and the design team could not blame the procurement while my continued involvement during the construction phase closed the loop and procurement team was not going to blame any of the design or execution.
It was simply the perfect example of team work, the one that can be used academically.
The making of
Splitting the scope of work of Tripoli's incinerators on different vendors and subcontractors requires indeed a lot of attention and accuracy not to face problems when assembling.
At the time of this project, there was no workshop in Lebanon capable of accommodating the foreseen height of the furnaces, but there was for sure a local know-how for the fabrication and assembly. I had then elected to fabricate the furnaces in Egypt having visited and assessed the capability of a vendor, ASF.
We decided to fabricate each furnace in 4 parts so they can be shipped to Lebanon and transported to site.
The Lebanese NAFCO was then awarded the site assembly of the furnaces while the transport from Suez to Tripoli sea ports and then to site was directly handled by me.
To make sure of the result and to enforce the coordination between the fabricator and the subcontractor, I had drafted a "coordination contract" that each of ASF and NAFCO had to sign along with my own signature and as a condition to get the job. The tripartite agreement constituted a major document for reassuring absolutely all parties and obtaining the necessary approvals on the purchase orders.
The coordination included four visits by NAFCO representatives to the premises of ASF in Egypt along the fabrication process and two visits by ASF representatives to site during the erection works.
The shipment of the two furnaces, each split in four parts, occurred on a chartered Lebanese ship that can accommodate the non-conventional and non containerized products, while the required permits form Suez canal authorities and Tripoli sea port authorities were processed by my logistics partner.
The fluidized bed combustors were successfully erected thanks to this cooperation scheme and the French refractory contractor was then called to take over the furnaces and start his works.
At the time of this project, there was no workshop in Lebanon capable of accommodating the foreseen height of the furnaces, but there was for sure a local know-how for the fabrication and assembly. I had then elected to fabricate the furnaces in Egypt having visited and assessed the capability of a vendor, ASF.
We decided to fabricate each furnace in 4 parts so they can be shipped to Lebanon and transported to site.
The Lebanese NAFCO was then awarded the site assembly of the furnaces while the transport from Suez to Tripoli sea ports and then to site was directly handled by me.
To make sure of the result and to enforce the coordination between the fabricator and the subcontractor, I had drafted a "coordination contract" that each of ASF and NAFCO had to sign along with my own signature and as a condition to get the job. The tripartite agreement constituted a major document for reassuring absolutely all parties and obtaining the necessary approvals on the purchase orders.
The coordination included four visits by NAFCO representatives to the premises of ASF in Egypt along the fabrication process and two visits by ASF representatives to site during the erection works.
The shipment of the two furnaces, each split in four parts, occurred on a chartered Lebanese ship that can accommodate the non-conventional and non containerized products, while the required permits form Suez canal authorities and Tripoli sea port authorities were processed by my logistics partner.
The fluidized bed combustors were successfully erected thanks to this cooperation scheme and the French refractory contractor was then called to take over the furnaces and start his works.
Poland
As a result of the Lebanese incinerators success, I was appointed by Suez as a lead buyer on the municipal sludge incinerators of Kielce and Gdansk in Poland. Poland is easier in terms of organizing the works due to the wide availability of local steel fabricators and the steels themselves as well.
The material could be then ordered at the proximity of each the projects and there was no need to have many intervening on the installations.
One good fabricator and contractor was appointed in each case for the complete package of the incinerator including furnace, fume treatment, process steel structure and erection. Only the building envelope (cladding and its structure) and the refractory packages had to be dealt with separately.
The material could be then ordered at the proximity of each the projects and there was no need to have many intervening on the installations.
One good fabricator and contractor was appointed in each case for the complete package of the incinerator including furnace, fume treatment, process steel structure and erection. Only the building envelope (cladding and its structure) and the refractory packages had to be dealt with separately.
The municipal sludge incinerator of Kielce - Poland during its erection at sub-zero temperatures
I recall very well my initial market study of the vicinity of the projects, which took me in the company of my colleague Maciej to not less than ten fabricators in the areas of Łódź, Kielce, Poznań, Gdynia and Gdansk.
Coming from the Middle East, I was simply impressed by the number of fabricators coming straight from the USSR era with lots of machines with a high capacity for bending, cutting, working steel plates and profiles, etc.
I still have engraved in my memory, the image of the central heating system of those large factories, fed from a central heat plant; very old yet operational installations.
Coming from the Middle East, I was simply impressed by the number of fabricators coming straight from the USSR era with lots of machines with a high capacity for bending, cutting, working steel plates and profiles, etc.
I still have engraved in my memory, the image of the central heating system of those large factories, fed from a central heat plant; very old yet operational installations.