Tags: audit, complimentary, cost avoidance, cost savings, free tips, janitorial, logistics, office supplies, Procurement, savings
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I have received more than a three dozen requests from executives who want to know how to drive instant or (near instant) savings for their company’s bottom line. 40% have come from CFO’s, and the rest from President’s and CEO’s. The Savings Corner will detail lowest prevailing pricing for a variety of commodities. And not just for Fortune 1000 businesses but for businesses from 10 to 100 employees.
Let’s start with an easy one, janitorial. First, don’t fall into a trap by signing up with a pure janitorial company. They have no way for them to take a small 10-15% profit without going out of business. Sure, they will razzle dazzle you with their “cleaning systems” that mount on the wall and their claims that their products will clean 40% more than the household equivalent. Besides, most of the cleaning systems that I have experienced over the years have a proprietary mount that will only allow that company’s product to be used with it – locking you into an overpriced solution. Best practices disallow proprietary solutions unless there is a huge (and I mean HUGE) benefit for your company – Let it be said now that any company that fails to use a universal dispensing system should be hustled away from the negotiating table.
Many of your other suppliers have drifted into the janitorial supplies arena because of the enormous profit potential. A good example of this is your Office Supplies vendor. Oftentimes, you can leverage the office supply store by requiring them to sell janitorial products at 10% over cost – or you take the entire block of business elsewhere.
And now for a secret. The single best place for janitorial supplies is not Walmart or Sams or Costco – it is your local dollar store – Dollar Tree, Dollar General, Dollar Store, etc. – Where else can you pick up 21oz of Comet for a buck – which is half the price of Amazon or Staples. And they have a wide breadth of cleaners, mopping agents and the like The key to buying these supplies is to have your procurement specialist do it once a month, write a number on each product (with a Sharpie) and have your cleaning staff perform a daily inventory. Don’t forget to invest five dollars for a hasp and padlock.
Incidentally, requiring a daily or regular inventory (not only for cleaning supplies) deters shrinkage – thieves usually take advantage of a place that is operationally sloppy – if they know you are watching, they will choose an easier target.
Annual savings for a small company averages more than $1500 annually including the monthly staff time for picking up the cleaning supplies. For larger companies, it makes sense to look at outsourcing the janitorial function – one company that I audited had the in-house staff emptying office trash cans three times a day just so they could appear busy. I favor limited outsourcing, making the employees responsible for keeping their desk, kitchen and common areas clean and using the janitorial service for dusting, mopping and zone cleaning.
Steve Gordon specializes in procurement and logistics cost saving initiatives – call him today at 865.356.3575
Remember what the Aberdeen Group says……….
“For a typical enterprise, it takes an increase
of $5 in sales to equal the impact of
a $1 reduction in procurement costs.”
Solutions is happy to complete a complimentary audit of your firm’s expeditures. Just call or write to get started.
If you want to know how to save money on a particular commodity, just send me a comment or email me directly. I would like to hear from you!
Solutions Business Consultants
”Bringing Service, Value, and Efficiency to the Supply Chain”
How you can make your company more profitable! [Part 1] June 18, 2009Posted by solutionsbconsultants in Business Improvement, Increase Profitability.
Tags: audit, CFO, company, COO, expenses, internal controls, money, President, Procurement, reduce costs, spend, spend management
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Everyone wants to reduce costs and expenses. Here are some self-help steps that you can do yourself (for free!) – perfect in these tough economic times.
In a recent Linked-in poll, we asked companies, “What is the best example of wasteful spending at your company?”
Two-thirds of the Linked-In respondents answered, “the wrong person in charge”.
If you think of who buys goods and services or approves expenses at your company, how can you tell if they are doing a great job?
The best way is to ask questions….
1) Are they frugal?
2) Do they bid out goods and services?
3) Do they partner with suppliers?
4) Are they on the lookout for new suppliers and new ways to accomplish processes?
5) Do they negotiate with suppliers?
6) Are they strong enough to say no to bad purchasing ideas?
If they are not taking advantage of some or all of these protocols, you have just identified several ways to help your business get on the right track.
We have interviewed department heads who are in charge of ordering. Most tell us they are “too busy” to shop around. Oftentimes, there is an administrative assistant in charge of procurement who lacks the ability to properly specify what is needed and does not posses the ability properly evaluate suppliers and their offerings.
We have also found wasteful spending occuring by employee(s) who are funneling business to a supplier that oftentimes takes them golfing, or treats them at restaurants or clubs.
This is not an exhaustive list and most businesses would be shocked to hear many of the stories that I have encountered.
Most bad purchasing methodologies can be traced to poor or no training and oftentimes, senior executives forget that spend management is a science, has to be learned and has a specific rule set that one should follow to make sure that your company is being taken care of in the best way possible.
The Second most popular item in our Linked-in survey was insufficient internal controls. Spending company money should not be easy and should have a multi-level approval process that ties in with the company budget for that particular spend. Additionally, there needs to be a responsible party who reports to the CFO, COO or CEO. This person must be accountable for the smart and efficient spend of company funds. This person should have the ability and authority to discuss and question all company spend, make sure there is adherence to budgets and oversee requests for budget overruns.
Finally, there needs to be a strong audit committee. Lack of internal controls have led to abuses that occurred not only at Enron but also at companies of all sizes – oftentimes causing catastrophic damage to the company.
I hope these “self-help” ideas have been useful. And if you have a particular situation that you would like to discuss, I would be glad to take your phone call or answer your email.
Solutions Business Consultants are specialists in cutting costs and expenses without sacrificing employees™. We take an enlightened look at a company’s spend and create innovative cost savings methodologies which bring money to your bottom line!