Published In:
Business Express Date Published:
3rd July 2003 Author:
Shelley Dempsey
The vast majority of Australian Businesses are being overcharged for basic services. Shelley Dempsey meets a team of cost busters who can help you whittle waste without losing face.
Think of ways to save money in a company and the first strategy that looms is to sack staff - an unpalatable option. Now for the good news: in most cases, there's a more positive path to follow. In fact, staff can truthfully be told their jobs will be made safer by cost-cutting, according to Fred Marfleet, chairman of Expense Reduction Analysts (ERA) Australia, an organisation dedicated to creating fat-free business. "That the first thing we say when we go into an organisation. We're not here to cut jobs. What we do saves money and that goes straight to the bottom line. And that should make jobs secure." Wasting time and wasting money can usually be eliminated, according to Marfleet. Nearly all companies can cut hidden costs on overheads such as telephone and internet bills, cleaning costs, freight and courier charges, travel, priting and stationery, he insists. So prevalent is the overpayment for these goods and services, ERA Australa estimates they can slash costs by a whopping 75per cent.
Solution - Companies need to identify cheaper and better value suppliers, install a more centralised ordering system and most importantly, implement these changes effectively. "It's not easy to generate a culture of change, but that's our skill," says Marfleet. "If we don't do that we don't get paid. We try to get a result that suits the stakeholder. If the stakeholders feel they've been part of the solution, then they'll be happy."
Embracing Change
Surprisingly, rather than resist and object to a culture of change, often employees willing embrace it. "Staff often say: 'We've always wanted to do this, but nobody's ever listened'," says Marfleet. "All we do is look at procurement and the process of procurement. And once staff understand we are there to help them, most people want to do a better job anyhow. If we can help them buy easier and buy better for the company, and it's going to make the company more profitable, then they can see the advantages of that." These professional cost-crunchers have pruned expenditure for thousands of companies in Australia , ranging from top corporations such as Castrol Australia, Heinz Watties Australia, Valvoline, BOC Gases Australia Limited and TMP Worldwide (TMP), to voluntary organisations such as the RSPCA, the Salvation Army and Anglicare as well as various small-to-medium enterprises (SMEs). It is chiefly SMEs that are often needlessly and unknowingly overcharged for hidden and overlooked overheads according to Marfleet. "I think SMEs are more inclined to waste in the overheads area than larger businesses," he says. "The reason is they don't have the large buying power by themselves. "They haven't got a procurement department which looks after the issues and therefore they don't have the procedures. It's very ad hoc. Everybody is too busy; there's not a big enough management team. They just haven't got the time or the business knowledge or benchmarking system to get the best prices." Ad hoc smaller charges can often mount up to a substantial cost, he says. "If you're looking at the cost of ordering print or office suplies or cleaning materials, you've got to have some control over who's doing the ordering and what they are ordering. "So you've got to agree on what product range you're going to use, what quality you're going to use and who you're buying them from. Procedures are really important, putting in a system of procedures and a system of doing the buying." Costs which can easily blow out for SMEs include printing costs - for brochures, stationery, business cards, catalogues and the like. And because printing is often done in a hurry and those using printing services often have little knowledge of the industry or what they need, companies frequently pay too mcuh. For example, recruitment advertising network TMP generated multi-million dollar savings of 23.6per cent overall within a few months on overheads such as printing, business travel, telecommunications and couriers. No staff were sacked at all during the cost-cutting process. In particular, TMP centralised printing functions with a printer that offers online facilities to print stationery and business cards. However, not all printing needs to be outsourced, says Marfleet. Simply transferring some functions to an in-house electronic database can save signifiant time and money. Bill payments can be made online therefore eliminating postage costs. That said, it is a mistake to automatically assume that buying items online means those items cheaper, or that internet solutions are a quick fix. "It's more convenience to buy online, but it's not necessarily cheaper," says Marfleet. "Not all suppleirs at the moment have the ability to fulfil orders online. In addition, some of the smaller suppliers give very good service, very personal service and very competitive prices. They just haven't been able to invest in the technology." However, Marfleet adds that buying online has obvious savings in personnel time, for items such as air tickets. "If implemented properly it can cut out maverick buying, such as buying from the brother-in-law, or buying because somebody doesn't like the smile of the usual guy."
Stick it out to save
But change is useless without implementation, hesays. It is important to ensure
that companies choose a cost-reduction analyst who is prepared to
stay the distance, he says, pointing out that his company is in
for the long haul with a commitment to clients for 24 months.
So how much do these cost-crunchers themselves deplete the bottom
line? The standard charge is 50per cent of the savings made over
an 18month period.
