We are all getting back to work and dealing with reduced demand, delayed or cancelled projects and supply chain issues in the event your demand has remained strong.
As one of our elected officials once said “Never waste a crisis” and now could be the time to analyze every dime of spending and make some changes that typically you would not have made.
It is not unrealistic to change some travel policies, benefit policies, demand price reductions from suppliers and change work rules(whether unionized or not) or anything else you have been dying to change! Change can be good IF you are managing it and the CFO should be the Chief Change Officer!
It is now crucial to save every dime and dollar and, as usual, anyone you ask in Procurement is going to tell you that we are getting the best prices and terms from our suppliers and there is nothing more that they can do.
Realistically-how would they know if they are getting the best price and terms on everything that they buy ?
Procurement usually spends 95% of their time on the key and strategic materials, components and services and the rest of the spend, typically 35 to 40% of the spend, is subject to subtle price increases, shorter terms, evergreen and automatic renewals-with an increase, insertion of adders for delivery, packaging or special orders.
We have several best practices to offer AND they can make the CFO and Procurement heroes in the battle to save money.
We have partners who can provide focused review of “almost any line item or purchase” and they provide their assessment on a performance based cost sharing model.
The “worst” case is that our experts can find zero savings. IF that was ever determined, Procurement would be one less thing that the CFO has to worry about.
The best case, and what we normally find, is that Procurement does a great job on the key purchases and we find savings of 15 to 20% on a lot of the other purchases. That is found money and although CFOs hate to write the check (out of the savings) to the contingency experts, smart CFOs realize they just found savings that will continue AND probably learned a bit about spending analysis, cost stacks and opportunities for savings.
We are glad to chat with you to determine if you want specialists or a sourcing expert to do a strategic sourcing analysis. You determine the scope and they report back to you.
Many of the expense reduction franchise guy are sharks and to a degree unethical (as most of us know).
We have vetted our partners and they realize they work for the CFO and have to provide real savings AND that the decisions remain with the client. No phantom or “could have saved more” savings calculations and invoices!
Couple of points for you to consider:
- Does procurement know that certain costs are semi regulated AND that price increases over a baseline could result in 36 months of savings? Telecom, certain utilities, trash hauling, haz mat disposal are semi regulated and I suspect that Procurement does not know that and does not track increases versus the baseline.
- Do you have a comprehensive spend analysis and a process to review increases, vendor performance (quality, on time delivery, product development, pricing, shipping terms, payment terms) that you can review? I suspect Procurement and Finance are focused on watching a few key items and that the others don’t get much attention (or you don’t have a lot of knowledge on pricing in those items and services). We are glad to offer a strategic assessment.
- An example-we all have software annual or multi year agreements and we are conditioned to 4 or 5% increases per year, perhaps more. IF IT needs it, they will approve the renewal and not challenge the increase or negotiate. It is not their responsibility and Procurement rarely understands software and service agreement pricing. Our experience has shown that you can negotiate decreases on these IT spends. Same applies to hardware purchases. One of our experts focuses on this and his savings will startle you. His expertise has saved our engineering firm significantly in the last two years since he opened my eyes!
- Let us know how we can help you reduce your expenses. We can help on:
- Benefit costs—25% savings have been realized.
- Hiring costs-10 to 20% savings have been realized
- Operating costs-material, components, shipping, services, utilities (cost and efficiency best practices), property taxes (in some cases) as well as insurances, legal fees, bank fees, etc.
- IT spend-software, service agreements, hardware, line costs (and capacity design/ utilization reviews), etc.
- Cap ex-equipment, installation, and related costs are purchases that Procurement rarely makes and the savings can be really significant also.
Give me a call and we can discuss your concerns and outline a plan. Then I will handle the introductions. You have nothing to lose!