Five Ways Companies Can Reduce Costs
Here are 5 tips to help you think about reducing overhead expenses;
1. Get better data: There is a huge amount of data available inside a company to help make better buying decisions. Yet this data is often fragmented and hard to turn into useful information as it may be held in disparate systems. Getting the involvement of the departmental end users on qualitative aspects as well as quantitative aspects will also help ensure expectations are managed and that buy in is increased as you start to move towards implementing solutions that can reduce expenses. This problem is not insurmountable and with time and effort you can ensure the right data is made available to the buyers and users of goods and services.
2. Hire expertise: Having an expert review your expenditures can save you money and time. A company that spends, say, €100,000 on telecommunications can’t usually afford to employ a €70,000-a-year telecom expert. However, if that company uses an outside telecom expert to review the category, savings of €20,000 to €30,000 a year is realistic.
3. Be a better customer: In order for your suppliers to dramatically reduce costs to you, they have to be able to operate their own businesses more efficiently. Take a look at the way you work with your suppliers and explore what efficiencies you can come up with to cut your supplier’s cost in working with you. This requires a little bit of lateral thinking and creativity but it usually pays dividends.
4. Put yourself in the supplier’s shoes: When developing a Request for Proposal, think about your request from the supplier’s perspective. What level of thoroughness could you provide that would result in a great quote? Most companies fail to get competitive pricing because they fail to provide all the information their suppliers need to have in order to minimize risk. Think about the RFPs your own company responds to most aggressively. Aren’t they the ones that provide detailed, complete and accurate specifications? Customers who inspire confidence and minimize the supplier’s risk are rewarded with the most aggressive pricing.
5. Level the playing field: Your suppliers have an advantage over you. Day in and day out, suppliers actively look for ways to improve their margins. But how often does your company negotiate a discount on, say, office supplies? Maybe once every couple of years? To make savings stick you should instil an ongoing review of the contracts, pricing, process, policies and products. Without this ongoing assessment it is very common that initial expected savings become unsustainable.
1. Get better data: There is a huge amount of data available inside a company to help make better buying decisions. Yet this data is often fragmented and hard to turn into useful information as it may be held in disparate systems. Getting the involvement of the departmental end users on qualitative aspects as well as quantitative aspects will also help ensure expectations are managed and that buy in is increased as you start to move towards implementing solutions that can reduce expenses. This problem is not insurmountable and with time and effort you can ensure the right data is made available to the buyers and users of goods and services.
2. Hire expertise: Having an expert review your expenditures can save you money and time. A company that spends, say, €100,000 on telecommunications can’t usually afford to employ a €70,000-a-year telecom expert. However, if that company uses an outside telecom expert to review the category, savings of €20,000 to €30,000 a year is realistic.
3. Be a better customer: In order for your suppliers to dramatically reduce costs to you, they have to be able to operate their own businesses more efficiently. Take a look at the way you work with your suppliers and explore what efficiencies you can come up with to cut your supplier’s cost in working with you. This requires a little bit of lateral thinking and creativity but it usually pays dividends.
4. Put yourself in the supplier’s shoes: When developing a Request for Proposal, think about your request from the supplier’s perspective. What level of thoroughness could you provide that would result in a great quote? Most companies fail to get competitive pricing because they fail to provide all the information their suppliers need to have in order to minimize risk. Think about the RFPs your own company responds to most aggressively. Aren’t they the ones that provide detailed, complete and accurate specifications? Customers who inspire confidence and minimize the supplier’s risk are rewarded with the most aggressive pricing.
5. Level the playing field: Your suppliers have an advantage over you. Day in and day out, suppliers actively look for ways to improve their margins. But how often does your company negotiate a discount on, say, office supplies? Maybe once every couple of years? To make savings stick you should instil an ongoing review of the contracts, pricing, process, policies and products. Without this ongoing assessment it is very common that initial expected savings become unsustainable.
Analyst Summary
With more than 750 experts in more than 30 countries Expense Reduction Analysts is one of the world’s leading cost management consulting practice. We specialize in finding savings for organizations across the world through a proven cost management process. Since 1992, we have help thousands of organization improve their bottom line and free valuable budget to fund their development. Our clients include small and medium sized firms as well as not-for-profit and public sector organizations and global players.
