expense reduction: the timing has never been better! lycia rettig, director expense reduction...
TRANSCRIPT
Expense Reduction:the timing has never been better!
Lycia Rettig, DirectorExpense Reduction Analysts
Which is easier to do?
Reduce expenses by $1or
Increase sales by $10?
Why All the Focus on Reducing Expenses?
• Current economic conditions are presenting challenges for most companies.
• Difficult to increase sales for most companies.
• Can be an alternative to personnel reductions.
Some Expense Management Challenges For Companies
Staff and Management has limited time to
address non-strategic costs
Employees with limited purchasing experience
makethe buying decisions
No benchmark dataNo time to monitor
Believing suppliers are looking out for their best interests
Believing suppliers are looking out for their best interests
Five companies with same supplier don’t get the same price
Five companies with same supplier don’t get the same price
TitleTitle
Believe they’re doing an excellent job of cost control
on their own
Believe they’re doing an excellent job of cost control
on their own
Level playing field between buyer &
supplier is a misnomer
Level playing field between buyer &
supplier is a misnomer
Multiple suppliersMultiple order points
Multiple suppliersMultiple order points
ExpenseManagementChallenges
Supplier loyalty doesn’t equate to
best price or service
Suggestions to Reduce Expenses
• Set expectations for cost reduction.
• Identify target areas and maintain a focus on them.
• Understand all components of the given expense area you are reviewing.
• Understand the benchmarks for your expenses. Ask others in your circles of influence what they are paying.
• Negotiate with your suppliers. Ask them for ways to reduce your costs without the need to create additional Competitive Tension in the market.
• Measure results, monitor for continued savings, react if not going as expected
• Take advantage of association discounts.
• Eliminate paper. Consider moving to electronic billing and statement mailing.
• Ask your employees for cost saving suggestions and reward them!
Analyze 4-8 weeks per category
Analyze 4-8 weeks per category
Define Options 4-8 weeks per category
Define Options 4-8 weeks per category
Implement
and Monitor
Implement
and Monitor
Best Practice Process Overview
General & Administration Operating Expenses
Expense Category ERA Average Savings
Freight 18%
Merchant Card Fees * 33%
Office & Break Room Supplies * 35%
Packaging 21%
Production Printing 14%
Small Package Freight * 20%
Voice & Data Communications * 26%
Waste & Recycling 29%
Credit Card Processing Fees
Do you know your true credit card processing costs?
• Not just the discount rate but the net effective rate with all of the fees included.
• Do you know if you are being surcharged for certain transactions because your procedures haven’t been updated to meet the current processing rules?
• Do you have the proper number of terminals and access points?
Office and Break Room Supplies
Buying name brands or house brands?
• House brands can often save up to 30% or more for a similar quality product.
Be cost vigilant.
• Establish a contract list with your supplier (80% rule).
• Recycled toner cartridges.
• Delivery / ordering options.
• Paper grade and stock.
• Binding choices.
• Color vs. black & white documents.
Overnight Small Package Freight Services
Are you using and paying for the appropriate service type?
• Ground services will generally deliver next day within 400 miles only without a service level guarantee.
• Is 10:30 a.m. delivery really required? would 3:00 p.m. be okay? Industry secret: more than half of the items scheduled for
3:00 p.m. are delivered by 10:30 a.m.
• Is next day absolutely necessary?
• Do you have a parcel audit and automated credit program in place for late deliveries?
Voice & Data Communications
Have you done a comprehensive review of your voice and data communications services?
• Can you reduce the number of suppliers to achieve greater discounts? Is this the best option for your situation?
• Can you leverage new technologies to reduce your costs?
• Are you using all that you are paying for? Lines, information & reporting.
Appendix
Steps in Comprehensive Expense Reduction Planning, Concentrating on Non-Core Operating Expenses
• Identify components of Non-Core Operating expenses.• Start with P & L and Comprehensive Supplier Analysis.
• Establish an overall set of expectations for cost reduction.
• Develop a strategy for each expense category over a minimum threshold.
• Define expectations for each person that will participate in the process.
• Measure results.
Complete analysis of your business and requirements
Process: Select and manage suppliers and prepare recommendations
Implement solutions, measure and monitor ongoing
Activities: • Define scope• Obtain data• Understand data• Know requirements• Benchmark
• Identify Potential Suppliers• Test the Market (RFP)• Analyze the data• Make recommendation
• Negotiate Supply Agreement• Implement recommendation• Monitor Compliance - Ongoing
Best Practice Process Overview
Deliverables: Baseline Report Recommendation Report
Implement & periodic review