Expense Reduction: the timing has never been better

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Expense Reductionthe timing has never been
better!

• Lycia Rettig, Director
• Expense Reduction Analysts
• lrettig_at_expensereduction.com
• 804-517-9863

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Which is easier to do?Reduce expenses by
1orIncrease sales by 10?
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Why All the Focus on Reducing Expenses?

• Current economic conditions are presenting
  challenges for most companies.
• Difficult to increase sales for most companies.
• Can be an alternative to personnel reductions.

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Some Expense Management Challenges For Companies
Believing suppliers are looking out for their
best interests
Five companies with same supplier dont get the
same price
Supplier loyalty doesnt equate to best price or
service
No benchmark data No time to monitor
ExpenseManagementChallenges
Title
Level playing field between buyer supplier is a
misnomer
Multiple suppliers Multiple order points
Staff and Management has limited time to address
non-strategic costs
Employees with limited purchasing experience
make the buying decisions
Believe theyre doing an excellent job of cost
control on their own
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Suggestions to Reduce Expenses

• Set expectations for cost reduction.
• Identify target areas and maintain a focus on
  them.
• Understand all components of the given expense
  area you are reviewing.
• Understand the benchmarks for your expenses. Ask
  others in your circles of influence what they are
  paying.
• Negotiate with your suppliers. Ask them for ways
  to reduce your costs without the need to create
  additional Competitive Tension in the market.
• Measure results, monitor for continued savings,
  react if not going as expected
• Take advantage of association discounts.
• Eliminate paper. Consider moving to electronic
  billing and statement mailing.
• Ask your employees for cost saving suggestions
  and reward them!

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Best Practice Process Overview
Analyze 4-8 weeks per category
Implementand Monitor
Define Options 4-8 weeks per category
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General Administration Operating Expenses
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Credit Card Processing Fees

• Do you know your true credit card processing
  costs?
• Not just the discount rate but the net effective
  rate with all of the fees included.
• Do you know if you are being surcharged for
  certain transactions because your procedures
  havent been updated to meet the current
  processing rules?
• Do you have the proper number of terminals and
  access points?

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Office and Break Room Supplies

• Buying name brands or house brands?
• House brands can often save up to 30 or more for
  a similar quality product.
• Be cost vigilant.
• Establish a contract list with your supplier (80
  rule).
• Recycled toner cartridges.
• Delivery / ordering options.
• Paper grade and stock.
• Binding choices.
• Color vs. black white documents.

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Overnight Small Package Freight Services

• Are you using and paying for the appropriate
  service type?
• Ground services will generally deliver next day
  within 400 miles only without a service level
  guarantee.
• Is 1030 a.m. delivery really required? would
  300 p.m. be okay?
• Industry secret more than half of the items
  scheduled for 300 p.m. are delivered by 1030
  a.m.
• Is next day absolutely necessary?
• Do you have a parcel audit and automated credit
  program in place for late deliveries?

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Voice Data Communications

• Have you done a comprehensive review of your
  voice and data communications services?
• Can you reduce the number of suppliers to achieve
  greater discounts? Is this the best option for
  your situation?
• Can you leverage new technologies to reduce your
  costs?
• Are you using all that you are paying for?
• Lines, information reporting.

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Consider Retaining the Services of a Consultant

• Consultants have access to proprietary benchmark
  data (price and service) across a wide range of
  expense categories.
• Knowledge is power using a consultant puts a
  category specialist on the clients side of the
  table and that levels the playing field between
  clients and suppliers.
• They do the work YOU make the decisions!

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Appendix
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Steps in Comprehensive Expense Reduction
Planning, Concentrating on Non-Core Operating
Expenses

• Identify components of Non-Core Operating
  expenses.
• Start with P L and Comprehensive Supplier
  Analysis.
• Establish an overall set of expectations for cost
  reduction.
• Develop a strategy for each expense category over
  a minimum threshold.
• Define expectations for each person that will
  participate in the process.
• Measure results.

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Best Practice Process Overview
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Consider Retaining the Services of a Consultant

• Consultants have access to proprietary Benchmark
  Data (price and service) across a wide range of
  expense categories.
• They know the types of deals/incentives currently
  being offered in a given market
• Knowledge is power using a consultant puts a
  category specialist on the clients side of the
  table.
• They know the industry tricks in the bidding
  process and thereafter.
• Consultants level the playing field between the
  clients and suppliers
• While each clients requirements are unique,
  outside consultants bring large aggregate
  opportunities to them.
• Clients receive excellent supplier attention and
  focus the suppliers know that if they perform
  poorly they may not be on the next RFP bidders
  list.
• They do the work YOU make the decisions!
• Assisting with implementing and monitoring a new
  supply agreement should be a key consultant role.
• This also allows you and your team to focus on
  revenue generating activities