Cost Reduction

Cost Reduction

The aim of each and every assignment is to fully benchmark the selected cost areas to identify where robust and sustainable cost reduction is available but also to confirm where a client is purchasing competitively. It is important to clarify that this work is based on:

  • Maintaining or improving specifications and service level criteria
  • Not disrupting a clients’ business
  • Allowing them to focus on their core responsibilities

INITIAL STEPS

All assignments start with the process of data collection. Occasionally this can be obtained electronically from the client or current suppliers (Essential for some commodities such as Telecom call data, Fuel Card Transactions and commodities with a high volume of transactions). However, for the majority of assignments we use our admin support team to carry out the following:

  • Access the clients’ purchase invoice records over a 12 month period
  • Copy the relevant information
  • Conduct analysis of the invoices within our own offices
  • Develop a database or baseline for each commodity

At this stage of an assignment there some important points to highlight:

  • All baselines are submitted to clients for approval and sign off
  • We are introduced to our clients’ key personnel
  • These Key employees provide specific service level criteria
  • We also obtain feedback on current suppliers and any bad experiences

One important aspect of the contingent service is the inclusion of our clients’ current suppliers. We introduce our involvement via a letter of authority from the client to demonstrate we are acting on their behalf.

The assignment then moves on to three critical stages, as follows:

  • Market research
  • Initial tenders and negotiation
  • Development and submission of the cost reductions identified

Apart from the potential request for additional information or clarification, all of the work involved in these three stages is carried out in our offices and the supply chain, relieving the client and allowing them to carry out their daily responsibilities.

We do arrange scheduled meetings with clients to keep them informed of our progress and to ensure that they are comfortable with the direction of the work being undertaken.

Once we have a robust proposal we submit the details to the client for review.

The important points to highlight at this stage of the assignment are as follows:

  • Clients’ are given time to review all proposals
  • There are discussed within a scheduled project review meeting
  • Any required amendments are carried out and revised proposals submitted
  • Clients approve/sign off proposals and an implementation date is agreed

 

IMPLEMENTATION

 It is of no benefit to any organisation to identify potential cost savings if they are not fully materialised. This is why our continued involvement is critical to ensure the savings are implemented as smoothly and effectively as possible. These are some of the actions we carry out on behalf of our clients:

  • Obtain references for any proposed new supplier
  • Carry out financial due diligence for any proposed new supplier
  • Arrange and attend implementation meeting with supplier and key personnel
  • Provide summary of meetings and necessary actions
  • Monitor and follow up all required actions to achieve implementation date

 

ON-GOING SUPPORT and REPORTING

 If a proposal is based on the introduction of a new supplier the initial stages of the relationship are critical. This is why we:

  • Maintain close communications with key personnel
  • Monitor performance of the supplier
  • Arrange and attend performance review meetings
  • Ensure any initial issues are resolved quickly and effectively

Even when the implementation process is complete our involvement continues. On a quarterly basis we obtain data from the successful supplier and prepare a reconciliation report to calculate the ACTUAL savings the client has achieved. This continues for the entire savings period, which is usually twelve months.

 

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