Published In:
America Economia Date Published:
30th July 2004 Author:
Gustavo Stok, Buenos Aires
Are your expenses in stationery, telephone & cleaning refusing to come down? The specialist consultancy group, ERA shows us how to reduce costs without dying in the attempt.
The Mexican branch of Coface, the French credit insurance giant had bulky, inflexible costs for telephone charges that resisted reduction. The executives of the company had tried a thousand times, but the costs, that represented 27% of the total production costs of the company, remained unchanged. Rafael Vizcaíno, CEO of Coface Mexico, surrendered and decided to take the bull by the horns. "As we have a very small infrastructure and not enough personnel to do a detailed investigation of telecommunication costs, we decided to outsource the service", says Rafael.
The
results proved him right: the company reduced its telecommunications
costs by 60% with the last exercise. The savings, that reached U$S
70,000, were significant for a company that invoices USD3 million
in Mexico.
The protagonist of this cost reduction is Expense Reduction Analysts
(ERA), a consultancy dedicated to reducing operative costs, from
stationery to cleaning, gas and electricity, transport, packaging
material and telecommunications, among others. The passion for the
use of the pruning scissors (secateurs)
has its explanation: ERA attains fees based only on verified cost
cuts.
They are not doing badly at all. With the backdrop of the recurrent crisis in Latin America and the company’s imperative necessity to reduce costs, the ERA business grows. As a franchisee of a British company, the consultancy established its regional headquarters in Uruguayan Montevideo in 2000. Soon they expanded with partners in Mexico, Ecuador, Brazil, Chile and Argentina. "Our focus is neither in the cost of personnel nor in the strategy of the companies", says Ricardo Wasersztein, Chairman with Bernardo Francaig of ERA for Latin America, in Montevideo. "We focus only on the operative expenses". Once contracted, the consultancy takes about 60 days to verify the structure of operative costs of a company and to identify in what areas savings can be achieved.
The next step is the implementation of cuts. In Coface Mexico, for example, ERA detected that some of the telephone suppliers were applying higher tariffs than those agreed in the contract. It soon reduced the high cost of the company’s mobile phones by contracting the service to a single carrier and negotiating a cheaper tariff. "Our advantage is that while the companies try to reduce their costs in telecommunications every now and then and based on an individual volume, we periodically make that type of cut for several companies and so we’re in a position to negotiate in bulk", says Wasersztein.
In addition to Coface, some of ERA’s clients in this region include the Mexican subsidiary of the computer science giant Dell Computers, the Ecuadorian air line Ícaro, the Uruguayan branch of Deloitte & Touche and the Brazilian freight transport company Expresso Aracatuba. ERA has not in all instances been able to increase profits, "We only wanted to know if we were efficient in handling our costs", says Raul Rivas, partner of Tea, Deloitte & Touche, in Montevideo. "For that reason, we used the service that ERA offered to assure us that it was only necessary to make marginal reductions in costs".
The cuts focused on the cleaning service. Thanks to its studies, they applied accepted time standards for the cleaning of “X"
number of square meters and ERA managed to reduce the cleaning contractor’s hours.
This expertise in cost cutting is one of the strong assets of ERA; the other is its capacity to negotiate better prices by greater volume. "They obtain discounted airfares and accommodation for our executives, because they have many clients in their portfolio", says Itali del Padre, cost manager of Expresso Aracatuba. This is no minor issue for a company in the heat of regional expansion with its executives travelling periodically to branches in every country in the southern tip of South America. The clip-clip of the pruning scissors is heard all over the place.
