How to Find Big Savings In Small Cuts In Overhead
Many companies that have already taken painful steps to cut costs are still wasting big, big bucks on "little things," such as office supplies, equipment service contracts, printing, messenger and overnight delivery services.
Problem: In-house staffs often lack the time or expertise to make sure suppliers are providing the company with the best quality at the lowest prices. Often, too, a cozy spirit prevails between vendors and company purchasing people, causing the vendor's sales people to fail to mention available discounts and the company purchasing people to fail to press for them.
Solution: With the aid of a cost management consultant, the company's spending habits will be carefully analyzed. Evaluate whether or not the company is getting the best available supplies and services for its operating dollars.
Key: Small savings on frequently purchased goods and services can amount to huge savings over a year's time.
WHERE TO LOOK...
Office Supplies: Most companies fall into the trap of dealing with higher-cost local stationers–at least sometimes–instead of ordering in bulk from big office supply chains that provide better prices.
Helpful: Get smaller local office supply houses and stationers to meet competitive volume pricing levels. A cost management consultant can direct a number of smaller customers to that vendor if each company makes it clear to the vendor how much business it intends to do there during the year.
Also: When buying office supplies, avoid brand names in favor of generic products.
Example: On copier paper, the savings can be enormous if the company specifies generic paper at $29/carton instead of a name brand paper at $44/carton. At most companies, no one ever checks to see what brands are in the supply room anyway. The company could even be paying for brand names and getting generic.
Service contacts: Many companies pay $3,000-$12,000 a year for service contracts on their office equipment, when it might be much smarter to simply pay the going rate for repairs–even as much as $175 an hour–when the equipment actually breaks down. Caution: Some service contracts are advisable and some aren't–your cost management consultant can help decide which should be kept or eliminated.
Example: One of my clients, a CPA firm, was paying $14.90/month to AT&T over five years to insure its telephones. It turned out that the company had other insurance that protected its telephone, so I was able to renegotiate its deal with AT&T. ·
Printing: For printing brochures, pamphlets and other important company literature, it's unusual for companies to get more than three printing bids. But, in reality, it can take 10 or even 20 bids to find the best price available.
If the company doesn't have the necessary staff to do thorough screening, it should consider hiring a cost management consultant.
Also helpful: Coordinate company bulk printing requirements instead of letting different departments order small jobs at ridiculous prices.
Example: If the company orders new business cards for all employees at once, it can get a deeper volume discount than if each department placed its own printing order separately.
Messenger service: For many big-city companies, messenger service is a significant annual cost item. Companies don't realize, however, that it's often possible to get a better prices with the same or nearly the same service.
Example: So-called immediate delivery (within one and a half hours) might be $8-$12, while the messenger service may offer three-hour delivery for only $2.95, usually offered for only a limited part of town.
Bottom line: If the company is a good customer, anything is negotiable today. Even if vendors won't come down in price, they'll be impressed that your company is scrutinizing such costs. That could help to hold down future price increases.
Overnight shipping: Like Xerox in copiers and IBM in computers, Federal Express enjoys a top reputation in overnight shipping. But it is not always the least expensive supplier. Don't count on the Federal Express salesperson to mention every possible discount. Ask what discounts are available. Real corporate discounts could save $4-$6 off the list price, including pickup. Your cost management consultant can usually get you a discount even when you may not qualify for one.
STAYING ON TOP...
Since pricing and service are changing so fast today, companies should make it a habit to check with all suppliers at least twice a year to see if there's a new way to save.
Example: In telephone service, MCI is always offering new discounts and service deals. Check to make sure that you are getting the best corporate discount being offered for your company's level of business. The same applies for office supplies as spending grows. Even if the company doesn't yet qualify for a better discount, find out where the vendor's next break comes and watch for the opportunity to ask again. Important: Don't expect the supplier to notify the company.
Bonus: When the company does qualify for a deeper discount, it can usually buy at that lower price for a long time to come–even if purchasing volume should decline somewhat. Most vendors won't take away a privilege once it's granted.
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