Services Procurement – Some Quick Tips on How To Achieve Savings
Procuring Services and Achieving Savings
Sometimes services procurement is a bit different than the standard purchasing of products and materials. Often it is not transactional so strategic planning is imperative. There are ways to cut costs in any industry without sacrificing quality. As the Procurement practitioner you need to devise best methods to sourcing and procuring services which will yield best value for your spend as possible.
Lowering Travel Costs
It’s no secret that Travel is in most organisations top 5 discretionary costs, as at some point you require your employees to travel for business. Business travel can be incredibly expensive if not managed well simply because it can be costly to obtain Air fares, ground transport, and accommodation. However this problem can be gone with proper management of a travel program. The introduction over the years Travel Management companies and the advancement of web based technology has given organisations the ability to manage their travel cost more effectively. Travel Managers can now manage, influence and govern their travelling employees. The introduction of web based booking tools have proven to be of most benefit. . For one thing, it provides you the ability to enforce travel policy, set out travel arrangements including your discount pricing with Airlines, Hotel and other services and most importantly capture spend activity. The key to a successful travel program is to have in place a travel management company that can assist you put in place and carry out your organisation’s travel policy and assist you with other travel supplier arrangements. They also play a part in capturing your spend data which you can use to manage your program. Online booking solutions allow you compare rates, select best scenarios and most importantly to your suppliers influence purchase towards their inventory, that way being a win/ win outcome.
Temporary Personnel
Procuring services can extend to hiring temporary personnel. Hiring employees can be a strain on a business budget, because when it comes down to it, employee cost sits on of the top of operational costs within many organisations. Further there certain roles within an organisation which have high turnover and/or lend themselves to short term assignments. As such procurement departments need to consider how it can support its organisation with is employee strategy and hiring process. There are many temporary agencies that hire individuals looking for jobs and use them to place within organisations as required. Consideration needs to be given on how this contingent labour as often referred is handled within an organisation. Often temporary employment agencies derive a commission on the placement of individuals within an organisation. These arrangements need to be set out as an initial step and well managed over time. There are specialists’ agencies that place individual eg mechanics, specialised labourers and general agencies that you can utilised to find stuff. In a downturned economy, temporary labour strategy also assists in managing cost strategies such as rightsizing and restructures. Hence business of all sizes needs to consider this category and the specific strategy they wish to pursue. For the larger organisations the set up of accredited provider panels also needs to be considered, not only for cost savings but also for quality and risk management purposes, in particular if there is large scale placement across the organisation.
Outsource Business Tasks
A prevalent part of business which is occurring across all sized organisations is the outsourcing of business operations. Outsourcing has become an important area of a procurement department and those involved in this area need to have an intricate knowledge of their business operations. There are many specialised organisations out there that can run certain parts of your business and provide you best return for the dollars you spend than what you would ordinarily achieve internally. Understanding what business processes can be outsourced requires skill and if done effectively can save an organisation considerable costs. There is a lot of work to be done in your business, but that does not mean you have to do it. Let’s look at some examples, there are certain departments, such as accounting and IT, shared services that can be outsourced. As far as IT goes, you can outsource the support entirely if you are using various systems providers.
There are several different accounting firms that specialized in back office accounting management that can assists your business or shared services companies that have scale and can handle tasks such as payroll and accounts payable. Although at times certain services may seem expensive the trade of f is the true value of what you receive and the use of your resources to other key aspects of your business. Outsourcing is certainly an area that business can save on costs but can also achieve considerable competitive advantage on it competitors.
Hiring Consultants
There are many during the course of business that an organisation requires the need for specialised services of individual practitioners or group to come into a business to execute business strategy and or work on a specific specialised aspect of a business. Your employees may not have the skill, required knowledge or experience to deal with certain aspects of your business. These are people who have been where you are now, and they will be able to tell you how to get the best from and/ or transform your business. This is where the hiring of specialist consultants is best value and although a consultant can be very expensive, they are infinitely cheaper than allowing a business problem sit and fester. That said consultants’ needs to be managed, and organisations need to consider how they select and place consultants within their organisation. There are consultant directories, companies, and many other venues for hiring. Consultants can be paid either up front, in instalments, or at the end of the job depending on how happy you are with the results. They real key is how select and set out the business brief for a consultant to execute. A lot of organisations select and hire consultants without providing them proper brief, closed instruction and clear service delivery expectations. Moreover do not properly manage expectation once consultants are in place. For larger organisations accredited/ approved panels of specialist consultants should also be strongly considered.
Advertising
Advertising for your company can be an expensive exercise, but thanks to the advancement of technology and the provision of various agencies an organisation can manage this cost quiet effectively. There are many considerations within this category, including advertising, Creative Agencies, Incentive Agencies, Media buying, and promotional products. A manager of this category needs to work effectively with internal stakeholders to understand their organisation’s marketing strategy and requirement. Hence needs to ascertain on this requirement what is the best procurement process and arrangements to services its business. With the advancement of internet providers there also plenty of cost-saving opportunities. Organisations in particular smaller ones, can advertise online in many different ways, one way being content creation. One example of content creation is article writing, which can provide legitimate back-links to your websites. This can be cost effective and easy to manage.
Printing
Printing is an incredibly important part of any business. Businesses need to print brochures, paper advertisements, or any number of other projects for the running of their business. Their many options available to run your print category and this is dependent on the size and nature of you print requirement. Of course you can print these yourself, but this can prove quiet an incredibly expensive exercise To cut down on costs you can make use of off-site printing services. There are certain stand alone printing shops that support printing of any size business and can provide service at very low costs. There are also Print Management Companies that act as agents for companies and run their printing requires. These agencies are typically utilised by larger multi business organisations that require large scale printing. These agencies can be run remotely or in house to an organisation. Procurement practitioners need to make sure that they are aware of what is best fit for their business and to select the most cost effective business operation.
Tips for Cutting Costs
* Lower Travel Costs by booking online via a TMC
* Use Temp Agencies to reduce worker costs and benefits
* Outsource various back office tasks to third party companies
* Hire Consultants to as your employees with specialized tasks
* Advertise through Back links and Article Creation
* Make use of Print Shops and Print Management companies
Considering the recent Global Economic Crisis, third party cost savings is essential and should be the cornerstone to any business. Of course the other side to service procurement is the service element to suppliers that supply you with goods and services. It is paramount that these suppliers ensure that they are first of all providing quality products, providing them on time, and of course having them in their inventory when you require them. Failure to do any of these can result in a reflection of service from you to your end client. Hence this needs to be managed carefully and thoroughly.
For this reason, it is imperative to maintain a supplier scorecard to manage performance and eliminate performance in turn risks your reputation and costs you unnecessary money. Hence you can ascertain which suppliers are providing you with the expected service and which ones are not up to the mark, that way you can make informed decisions on who you continue with and which suppliers you do not. You will want to stick with the ones that are providing such services, and get rid of the ones that are not living up to their promises.
Remember, it is always a balancing an act of cost, risk and service quality, hence it is important to get the balance right as ill informed decisions can lead to potentially detrimental outcomes to your organisation. These are a few tips that you can use to save money in your business. Of course this is only a snapshot, the ‘tip of the iceberg’ so to speak and there are many others both generic and specific to respective to spend categories however these require years of experience and knowledge. Remember that there will be many bumps in the road, and you may experience failure long before you experience success. So long as you heed these words however, you will find that it is a little more bearable, and not only will you prove to yourself that you can do it, you will prove to your superiors and to your investors that you have your head in the game. So get started, and implement as many new procedures as soon as youcan.
Michael O’Brien is a Partner at Epago Group. He and his partners have a combined experience of over 20 years in the procurement solution and business travel management business. Visit today to learn more about managed services Australia Epago provides.
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