Report of Procurement Executive Committee Meeting
Montreal, 22nd to 24th November 1993
Attendees:
B&W - Chuck Dawson, Tom Dunn, BATcf - Hermann
Schneider,
BATCo - Ed Watt, Jim Campbell, I.T.L. - Tom Lee,
Don McLeod,
Souza Cruz - Divaldo Gomes, Marcio Dederich
SUMMARY
The primary objective ofthe meeting was to agree
the sourcing strategies to be
adopted by each company, following supplier
proposals for the whole Group's business
for Filter Tow, Cigarette Paper/Plugwrap and
Board. Tables identifying both the new
Group sources and volumes, along with the
calculations used to identify the value of
savings to BAT ofthese new arrangements, will be
circulated and agreed before year
end, following further discussions with key
suppliers.
Filter Tow - The most significant change will be
the switch of tonnage from Celanese
by BATCo in its entirety and by B&W in part.
Volume gains will be made bv
Eastmans, Dalcel and Rhodia, Courtaulds will hold
ground. Actual Group wide cost
savings from pfice only in 94 will be around $11
million with gains in all companies.
This is $3 million more than had been estimated at
the May meeting. Still to be
progressed are the usage reduction benefits
through grade rationalisation identified at
$3.0 million in BATCo plus any potential
established by other TSG companies.
Cigarette Paper and Plugwrip - A radical reduction
in tile supplier base to BATCo
will take place, with consolidation by other
companies. Major gains will be made by
the Kimberley Clark/PDM group, Wattens and Ecusta,
with Schoeller and Hoesch
holding volume and Glatz becoming a marizinal
rflaver, supplying Germany only. Other
small, lower quality suppliers ie Fletchers, Job
Laria, Miquel Y Costas will be- dropped
entirely. Group owned sources, ie Pirally and
Tribeni, are unaffected by these changes.
Although details still have to be resolved, it now
appears that cost reductions after
implementation will be approximately S8 million
pa. Significant opportunity will still
be available for cost saving by moving flax papers
towards mixed fibre or woodpuip.
Board - Agreement was reached about the tonnage
split world-wide for Solid
Bleached Sulphate (SBS) board. Iggesund, of
Sweden, and Federal, of the USA, will
be BAT's primary partners in 1994. Westvaco (USA)
will continue to supply B&W
and ITL with significant tonnage and International
Paper will remain as a small supplier
to ITL only. The major switch oftonnage is from
Westvaco. Unfortunately,
Westvaco, as a major supplier to B&W through their
printer VFB, have refused to
convert any other board than their own. Group
global savings therefore mav not be
maximised in 1994, but B&W will aggressively
pursue this restriction. Estimated cost
savings for 1994 are now $8 million from price
reductions. Weight reductions
continue also to be progressed by each company.
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BATCO doCUrnent for Province of BritiSh C01UMbia
26 October 1999


SBS board tonnage represents 45% ofBAT's world
wide board consumption. Duplex
boards account for the remainder and
rationalisation and renegotiation for this element
will be led by BATCo as the major user throughout
94. The establishment ofa price
and quality marker for SBS first will now enable a
fresh perspective to be taken on
duplex tonnage.
Overall cost savings from price reductions for 94
versus 93 should now be $27
million on these materials, $8 million more than
estimated in May, with additional
savings from specification changes still to be
progressed of over S7 million.
Future Activities - The meeting identified that
the next materials to be progressed
would be Duplex boards, Inner Bundling, Wrapping
Films and Printing Papers with a
provisional meeting set for the week of I I th
April 94, in Hamburg. Prior to that, data
on all current purchases will be exchanged and key
suppliers identified and
approached. Tipping materials will be considered
later in 94. The complexity ofthis
product requires investigation and proposals for
rationalisation first.
E Watt
1/12193
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BATCo document for Province of British Columbia 26
October 1999