One of the problems that a lot of people experience is that over time their supplier base gets very flabby. By flabby, what I mean is that you’ve got too many suppliers. Within that there are too many transactions, not just caused by the number of suppliers, but also caused by not managing those suppliers and telling them what your requirements are, which means that they are not invoicing you in an efficient manner. This is procurement management and the aim is to get a control on your business costs because all of those trabnsactions and suppliers are costing you money every time that you post an invoice to your purchase ledger.
Every purchase invoice costs you maybe £30 or £40 to process from start to finish. So that’s from raising the order the whole way through to payment and reconciling the bank. If you can take some cost out of that process, there’s a benefit to you.
It frees up resource within your finance team to do other work.
It’s pretty simple & here are some pointers for you:
1) Run a nominal report by supplier for the nominal codes that you are going to review. Look down that and, with colleagues, seewhich of the suppliers can actually supply more products than they’re currently supplying, whether that’s geographical spread, or product spread or …..
2) Request information from each supplier about the products they supply you with and ask at the same time what else they could supply as part of your cost reduction & spend optimisation programme.
3) Once you get the information back in from the suppliers about which products they’re supplying & could supply, go into the detail of it on a spreadsheet and mark which items could be provided by another existing supplier.
4) with that detail you have the tools to tender the business as part of your cost reduction efforts.
An aim of your procurement management programme could be to reduce the number of suppliers. We had a case where a client with 25 sites had 19 suppliers for the same product range. Madness. Now, it was all done for the right reasons at the time as the sites were opening or acquired, but it was never centrally consolidated as part of a thought through procurement management programme.
In terms of spend optimisation and using cost reduction to drive down your business costs you should also be aiming for one invoice a month per supplier.
1) A consolidated monthly invoice which has a
2) schedule attached to it, showing the breakdown by nominal code for each of the sites which can be sent out to the sites
3) the sites then approve their spend before the management accounts are produced so that you’re covering all the bases.
We’ve seen situations where clients have gone from over 100 transactions a month to 1.
You can do it too. As part of your spend optimisation programme you’ll build stronger relationships with your suppliers so that your entire procurement management programme is integrated and drives down your business costs.
In terms of procurement management, understand your supplier systems and turn them to your advantage. For example, get better credit terms. If the single consolidated invoice is dated the last day of the month, which is typically what it is, and you get 60 day payment terms, you can get up to 90 day payment terms for the items delivered at the beginning of the month.
So lots of benefits and a process that we go through which you can implement either fully or in part.
It’s part of our standard TPG Fair Market Value Savings Process.
m: 07768 421901
Our client the United Synagogue operates 50 sites, the majority of which are within inside the M25. They have been a client of The Procurement Group since 2006 and we value the long-term relationship that we have with them.
The Procurement Group have been saving UK businesses money for over 20 years using our procurement management techniques to drive down their business costs.
In this instance, the United Synagogue had no formal strategy for acquiring photocopiers and The Procurement Group identified this, which led to this project starting.
The main issue was that every site had its own contract, meaning that there were over 30 different suppliers. Each supplier had a different contract end date, different pence per copy charges, different termination requirements, and provided different manufacturers equipment. This made the estate very hard to manage for the United Synagogue’s in-house IT department.
The Procurement Group (TPG) try to simplify clients’ lives wherever possible. In this instance, we saw the opportunity to deliver a single contract, from a provider who would exit the United Synagogue from all of their existing contracts and still deliver a saving. The benefits to the United Synagogue would be that they would have brand new standardised equipment across their estate and also that they would have one transaction a quarter going through their bank and accounting system rather than over a hundred as was the current situation.
For this project to work, TPG had to have a thorough understanding of what was being paid at each of the 50 sites currently. This was actually the hardest part of the exercise because we had to contact each site and some of them don’t work five days a week so it was a difficult task to fulfill. To achieve this each site was visited and it was established what equipment they had, how old it was, how many copies they’d done, whether it was owned or leased and how copies were paid for – pence per copy or by buying consumables. That way we’d established a benchmark.
TPG then engaged operationally with the United Synagogue to understand their requirements going forward at each site, drawing up a list of the equipment specifications required, tendering the business, arranging beauty parades for the client to meet with suppliers to understand who was the best fit, and then to negotiate the contract with the suppliers.
Working closely with the United Synagogue’s head office team, we were able to achieve this and ended up delivering a 15% saving across the estate guaranteed for three years. It was important to both the United Synagogue and TPG that title to the goods passed to the client at the end of the initial three-year term because usage is very low at each individual site and therefore, the equipment would be in good condition rather than need replacing which is the norm in the copier industry.
TPG like to take a long-term view of situations and rather than delivering the maximum savings at day one, in this case, agreed a two-step approach with the United Synagogue. The first step was to get the estate consolidated with one supplier. As an outcome of this, we were also able to install software which recorded the exact usage at each site, thereby, overcoming one of the biggest hurdles we all had at the outset which was actually understanding what the usage was. The second stage will then be to retain the existing equipment and enter into simple maintenance agreements for all of the equipment going forward, meaning that the lease payments for ownership of the equipment disappear and deliver significant savings to our client.
This is an example of how TPG bring their considerable experience to bear for the benefit of clients and deliver long-term solutions, thinking outside the box and always taking the best route for their clients, whether or not that impacts on TPG’s revenue in the short term.
If you’d like to find out more about how we use cost reduction and spend optimization workflows and processes to analyse business data in order to ensure that we deliver best value for all of our clients in whatever sector they operate, then contact me, Simon Unger, on 07768 421901 or email@example.com
As energy prices rise and budgets get tighter, most businesses are looking for ways to save money on their electricity bills. Most of us are aware of the energy saving tips, like turning off computers and lowering heating, but in this article we are looking at some of the bigger picture ways to save larger amounts of money on energy, reducing overheads and increasing profits for your business.
Now in this section, we’re not thinking about going green in an environmental sense, but more in the ‘back to nature’ sense. If you provide employees with a space outdoors, many businesses find that their employees don’t use company equipment and resources as much during their lunch hour. Of course, this is likely to be more effective in the summer months when the sun is shining, but getting staff outdoors for a short time every day increases morale and productivity overall.
Computer technology company Dell announced recently that they are aiming to have at least half of their workforce working remotely by 2020. Whilst this may seem like a huge number, it could be worth it in terms of the vast savings that can be made.
For a lot of businesses, things like IT, secretarial support and even sales teams can be outsourced or home-based roles, as long as systems are in place to retain communication and motivation. These days, many workers are seeking flexible working arrangements to improve their work-life balance, so a move towards remote working may even improve staff morale.
This reduces the energy used drastically, as you don’t have to supply the electricity for employees to work and save money on technology, heating and lighting as well.
Ditch the Car
Company cars and fuel costs are one of the major expenses for many businesses. Savvy savers are looking for ways to save on the cost of fuel. Car sharing or having a car pool are two options that that will reduce fuel consumption saving money overall.
This means that employees leave the car at work ensuring they only use it for work purposes and it’s available at weekends, evenings or when the employee is on holiday. This not only allows others to benefit but cuts the cost of petrol allowances considerably.
Negotiate with Suppliers
At The Procurement Group, we help businesses to negotiate their existing contracts with suppliers (or consider alternatives if necessary) to ensure that they are on the best tariffs and see whether any further savings can be made. We will look at all of your outgoings, not just energy, and give you recommendations of where cost savings can be made. Best of all, we guarantee substantial cost reductions within four weeks and if you don’t save money, you won’t pay a penny, as our costs are a fraction of the savings that we generate for you. For more information, contact us today.