As the economy starts to cool off – and whether or not we go into a full-blown recession – every business should be looking to cut costs to the bone. And if the process of saving a few hundred pounds on stationery looks like taking more management time and money than can be saved, getting in a purchasing consultant begins to look like a good idea. The Cost Reduction Partnership (CRP) is one such company. “There are reasonable opportunities (for cutting costs) that even the most diligent FD just isn’t aware of, and possibly shouldn’t be,” says CRP co-founder Matthew Eatough. “If they’re spending all their time worrying about stationery, perhaps they’re mis-focusing their attentions.” The CRP works purely on a contingency basis – the only money it takes is based on the savings that clients make over one year. Once contracted, it sends in a couple of accountants to measure up their client’s business. “We do an audit to see where they spend their money, who they spend it with and what the profile of the suppliers is,” explains Eatough. Once the audit is carried out, the CRP accountants and consultants spend six to eight weeks comparing their findings from the client with a central database of suppliers and services. The database contains almost every product or service a company uses. CRP makes a point of knowing where volume discounts can be had, what prices specific suppliers are charging across a number of different clients and which suppliers are able to provide lower value services that still fall within the client’s quality thresholds. In almost every case, the CRP report will make several recommendations for sizeable savings. Of course, the process isn’t always that easy, and CRP has learned some important lessons over the last few years. “If you were to go into an organisation and ask a buyer, ‘How well do you buy stationery?’, they’re almost certain to say, ‘Very well, thank you very much,'” says Eatough. “But if you look in depth before that, you’ll probably end up knowing more than they know themselves. “The reason we will only work with either the finance director or the chief executive these days,” Eatough adds, “is that they are probably the only people in the organisation who will change the global view. If it’s the finance director, he’s got a legitimate lever over all these areas.” Even when the most senior executives are involved, however, getting from the audit to the actual savings can be a lengthy affair. “Finding savings is not the difficult part to do,” says Eatough. “The issue is to help the clients do them. We rarely find savings because people have been incompetent, it’s usually because they’re pressurised and they’ve got a business to run.” But with the FD on side, lower levels in the organisation can be pushed into action. That’s one of the reasons that the CRP avoids larger businesses. “The politics are so horrible,” Eatough complains. “The FD in those sort of organisations is so remote from what we’re talking about that we don’t get enough push down.” In other situations, the savings are so compelling that the CRP actually waives the usual “50% of first year savings” contract. For example, one firm seemed to be overspending on advertising, although most of their budgets were channelled through a single advertising agency. The CRP investigated and found that the agency’s sub-contractors – printers and production houses, for example – all seemed to be rather expensive. Further digging revealed that all of the sub-contractors were in fact owned by the advertising agency’s parent company. Armed with the CRP report, the client was able to demand refunds running into six figures. That’s not to suggest that companies should try and find areas they’d like a purchasing consultant to focus on. “A limited remit is not asking us to tell them where they’re wasting money – and if they knew where they were wasting money, they’d have done something about it,” Eatough points out. And not every company has savings to make. One client had slashed costs prior to going public, mindful of City wariness towards retailers. When CRP went in, there were simply no savings worth the effort. Working on the “no win, no fee” basis, you might think this was seriously bad news for CRP, after going to the cost of audit and analysis of the company’s operations. But then, finding a client which is a paragon of cost virtue is like finding a shop assistant who’ll carry your shopping.
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