Royal Mail opts for SAP to cut sourcing costs

£300m savings would buy a lot of stamps...

Royal Mail is aiming to save £300m on procurement costs by 2009 with the help of a hosted e-sourcing application from SAP.

The SAP application went live in June after a relatively short two-phase implementation of just over three months and is being used by more than 100 Royal Mail staff.

The SAP-hosted software will help the procurement team manage £2.3bn of annual expenditure by Royal Mail. It replaces disparate systems and gives staff greater visibility across the contracting process.

Daniel Cameron, Royal Mail procurement director of performance and transformation, told silicon.com: "What's become very evident is the technology gives us more bandwidth and shortens the procurement process."

The application being used is from SAP's 2006 acquisition of Frictionless Commerce.

Cameron said going for the hosted option represented a change in approach by Royal Mail.

He said: "There has always been a desire to have things inside but we have hosted the application rather than put it behind our firewall. It is secure, works and for a minimal cost."

Royal Mail is working with SAP on extra functionality for the future, including features such as vendor management.

Cameron said: "We are looking to make it more connected with what already exists here in the SAP landscape."

His advice to other companies is to take a phased, rather than a big-bang, approach and do plenty of road testing to ensure it is fit-for-purpose from day one.