Opportunities in Marketing Procurement March 26, 2010Posted by solutionsbconsultants in 1, Business Improvement, Increase Profitability, Marketing, Procurement.
Tags: advertising, agency, creative, design, expense, Marketing, spend, waste
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Thanks to Robert R. of New York City for his question, “Steve, I am a CFO of a medical supply manufacturer. Our marketing spend has spiraled out of control. What suggestions can you provide to help put this cost center in check?”
Great question, Robert. Marketing spend oftentimes represents a large portion of a company’s indirect spend. Without specific targets or a look at your detailed spend, I am going to provide a generalized list of items that you can focus on.
1) Rank marketing spend by dollars.
2) Focus on top 20% of spend.
3) Use agencies and outside creative ONLY for idea generation and development of concepts whenever possible. Never use them to outsource printing, video production, web-design, etc. unless you want to pay a large 25% or more premium. (Note – even though agency commission might be 10% they will always use the high cost provider (since they make a percentage of the final price).
4) Create an in-house agency to take advantage of agency discounts.
5) Resource top 20% of spend – print, video, web-design, seo/sem, etc. And source out to 7-10 supplies instead of the industry standard of 3 potential supplies. The advantages of engaging multiple suppliers in the quotation phase are based on statistics – you cannot locate innovative, competitive, and quality-oriented suppliers with a small sampling.
6) Require that all completed digital files are supplied to the marketing department including original files, fonts, images, etc. This way your in-house graphics/video person can repurpose graphics and video at no additional charge to your organization. (When I use the words “original files” I mean the original source files (such as a flash .fla file or layered photoshop file) instead of the completed file (flash video .flv or .swf or merged photoshop file). The reason for this is that you can only edit the source file. My experience is that you must require this to be done when you place the original purchase order.
7) Marketing has a tendency to go with who they know and oftentimes they have a personal relationship with many of these suppliers. Sometimes this can be useful but once a supplier knows there is no competition you can guess what happens – price creep (and it never creeps down).
8) In the web-space be careful of trying to reinvent the wheel. Chances are that someone has created that special widget or function that is needed. There are great sources for inexpensive quality code, Search Engine Marketing and Optimization, and other web services. Make sure to be careful when creating the scope of services document so nothing is left to chance and make sure to involve multiple suppliers. Even if you are in a major metropolitan area, you will need to conduct a national search. Research can help you target your sourcing.
9) Take the time to understand and document your company’s marketing strategy. Early involvement by Finance and Procurement can eliminate any rush procurements which is used as a tactic to avoid best practices.
10) Never allow marketing to unilaterally select suppliers and negotiate with suppliers. This is true with all departments, not just marketing so don’t think I am picking on marketing folks in particular.
11) Consolidate suppliers whenever possible to leverage spend.
12) Create a preferred supplier list of suppliers who provide quality service at approved pricing.
13) If you shoot video, this category has huge potential for savings. The economy and technology have produced a wide variety of talented individuals and equipment who can take your (or your agencies) concept to successful completion. Even if you are in a small market, a few phone calls can lead you to a wide variety of suppliers. Hint: Stay away from suppliers who use hardware based Avid suites or non-digital solutions Currently the best bang for the buck are editors who use Apple’s Final Cut Pro Studio.
14) Limit long-term contracts for marketing services – that means not signing any agency contract – business is tight and competitive so you as a buyer are not compelled to limit your options.
15) Develop strategic partnerships with suppliers – concentrate on value-add services, payments terms and other benefits that they can provide.
Yours in Supply Chain,
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 have a topic of interest you would like me to discuss in our blog, “in-person”, or if you find a typographical error, 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!