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Marc Gilman - ERA Guide

ERA Presentation - Definitive Guide to Cost Cutting, Authored by Wes Thompson

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Marc Gilman - ERA Guide

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  1. The Definitive Guide toCost-CuttingMarc GilmanManaging DirectorExpense Reduction Analysts

  2. A Global Cost Reduction Consulting Firm Argentina Australia Austria Belgium Brazil Canada Chile Colombia Cyprus Ecuador Finland France Germany Greece Hungary Ireland Italy Jordan Korea Luxembourg Mexico Morocco Netherlands New Zealand Panama Portugal Spain Switzerland United Kingdom United States Uruguay

  3. Today’s Agenda • Perspectives on corporate spending in the U.S. • Common perceptions and misconceptions about procurement • Opportunities and strategies for savings • What to do next

  4. Perspectives on spending Cash is tight for everyone

  5. How Businesses are Managing Source: McKinsey Global Survey

  6. Common procurement misconceptions • Pricing from suppliers is applied evenly to similar customers. • Your expertise in purchasing in one cost category will produce similar results in another. • National pricing agreements are always better than local or regional agreements with the same company. • Loyalty to a supplier translates into best pricing and service.

  7. CFOs surveyed say: Source: CFO Magazine

  8. Why mid-sized companies overspend Source: Aberdeen Group. Tim A. Minahan, "Sourcing in the Mid-Market: The Supply Management Echo Boom". 2006

  9. Average cost reduction results by expense category

  10. Cost reduction can be profitable Column1 Baseline 20% CostReduction EquivalentIn Sales Revenue $ 100 $ 100 $ 140 Direct operating costs $ 35 $ 35 $ 49 Labor costs $ 35 $ 35 $ 49 Non-core indirect costs $ 20 $ 16 $ 28 Net profit $ 10 $ 14 $ 14 After tax (40%) $ 6 $ 8 $ 8 20% cost reduction = 40% increase in Net Profit$4M in expense savings = $40M revenue increase

  11. Expense management challenges • Multiple suppliers and multiple order points. • No internal benchmark data on purchases. • Staff and management have limited time and resources to address non-strategic costs. • Employees with limited purchasing experience are making buying decisions.

  12. Steps for Expense Reduction Planning • Identify components of non-core operating expenses starting with your General Ledger and a comprehensive supplier analysis. • Establish an overall strategy for cost reduction. • Develop a goal over a minimum threshold for each expense category. • Establish expectations for each person who will participate in the process. • Measure results.

  13. Askyour suppliers what you can do to reduce costs

  14. Look at processes

  15. Look at what you pay for the goods and services you buy.

  16. Consolidateyour purchases

  17. Ask your vendor to help you manage your spend

  18. Create a competitive environment

  19. Be aneducated consumer

  20. The bottom line To get best market pricing: • Use benchmark data (your own, plus market data) • Hire or apply cost-category expertise (each category has its own pricing model, methodologies, jargon) • Put yourself in the shoes of your suppliers • Become a better customer to suppliers • Keep suppliers competing for your business

  21. Example Questions you should ask to find savings in three common expense categories…

  22. Office Products • Are you buying your office supplies (including ink/toner and break-room supplies) from one supplier (who)? • Do you have purchasing policies for office supplies including minimum order size, contract item list, who can order items not on the contract list, etc.? • How do you control product price increases? • How do you audit office supply transactions to insure there are no overcharges or substitutions without your approval? • Are you receiving incentives/rebates for electronic ordering, average order size, or your annual volume?

  23. Merchant Card Processing Fees • Is your current fee structure optimized for your business? • Up to 95% of the cost of processing a transaction is dictated by process, not pricing. Are you fully compliant with the rules and conditions required to obtain the optimum card association rates? • The card associations offer beneficial rates for specific industries or card types. Could you be eligible? • Are you confused by the various platforms, gateways and myriad of options available to process merchant card transactions? • Do you have the tools and reports needed to manage this whole area of expense properly?

  24. Insurance & Risk Management • Is your organization maximizing the return on its insurance expenditures? Are you transferring risk appropriately? • Have you completed a risk assessment/gap analysis and determined any gaps in coverage or overlapping or duplicative coverages? • Is your broker or agent being compensated in a manner that puts them on your side of the table? Has the incentive of higher commissions been neutralized? • Do you know the types of coverages similar companies are carrying and the premiums they are paying?

  25. Action Plan Develop an overall cost-management strategy; priority Develop cost-reduction goals for each category Set expectations for each person who will participate in the cost-management process Set a timeline for results Audit savings on an ongoing basis GET STARTED!

  26. Thank You Marc Gilman (866) 852-1462 mgilman@expensereduction.com www.ExpenseReduction.com

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