Sales are down so we need to control expenses!
Today’s post is from Ronald D. Southard, CEO and SafeSourcing Inc.
When one reads a lot, articles constantly jump out at you that just make you say duh!
Sales are down so we need to control expenses is one of them. I am beginning to think that they actually might have a book of business school phrases that includes statements like this. These statements always seem to come out during earnings season or just after in order to offer protection versus erosion of equity particularly in publicly traded companies. What always slays me is that as a shareholder I would like CEO’s and CFO’s to come out with this plan long before the excuse is event needed. If you have the right team in place, one would already know that sales are falling based on your teams long range forecast and action should have already been taken to mitigate those results.
In today’s issue of THE WALL STREET JOURNAL under corporate news there was just such an article. I will leave out the name here to protect the guilty. But, wouldn’t it be nice if we started to see articles that went something like this. COMPANY <Insert Name> focused spending reduction preserves earnings estimates.
There are just too many companies with too many tools out there today that can assist companies in reducing costs in all product and service areas including commodities for executives to need to use these statements after the fact. I say assist, because most Fortune 500 companies have procurement departments and many have leadership in the procurement area at the officer level like a CPO. These teams in most cases are very competent based on their headcount. However what we regularly see in the procurement space is that all the great intentions and planning in the world does not return the best net landed cost to companies when they try to source by themselves. Understaffed teams, historically evolved procurement practices and less than optimal supply chain management create these results when headcount is not optimal. For the most part we typically see double digit improvement across the board in savings when Tier I and Tier II companies enlist the assistance of e-Procurement solution providers like SafeSourcing Inc.
E-Procurement solution providers for the most part today offer their tools in Architecture as a Service and Software as a Service Cloud based solutions. The benefit of these offerings are an almost immediate or instantaneous ramp up time, little to no IT involvement, cost neutral pilots and the opportunity to walk away just as quickly.
During the last six years, SafeSourcing has run billions of dollars in spend through our e-Procurement tools in the form of RFI’s, RFP’s and RFQ’s or Reverse Auctions. Average savings over this time are in excess of 23%. No other solution provider can make this claim. The reason for these results is partly our tools and mostly our people. Isn’t interesting that we see better results for companies because they are understaffed and because of our people.
Here’s an example: You are a fortune 500 company and your buyer or category manager has to source stretch wrap. You have users in your DC’s or Warehouses, but the person sourcing this category may or may not talk to them and only sources this category once or twice every couple of years. The question this begs, is are they up to speed with the current stretch wrap technology.
1. Do you as a company still hand wrap?
2. Are you using the lowest level gauge and mil weight?
3. Do you know the best size rolls to source?
4. Is the product pre-stretched?
5. Are you aware of all global and regional suppliers?
6. Are you using machine wrap or transitioning to it?
These are just a few of the questions that a SafeSourcing project professional is aware of because they source this and other product categories dozens of times a year.
So why are costs not as low as they need to be at all times? And why do CEO’s and CFO’s have to make the same old tired statements time after time? Because they are not aware just how easy it is to augment their procurement department with resources that will cost them nothing because the average ROI for these services is typically 10X or higher. And because their team keeps telling them that we have an ERP system and tools so we can do it better. Our results would obviously indicate that this is not so.
If you really want to learn how to reduce your costs on Expense and cost of sales categories, please contact a SafeSourcing Customer Services Account Manager to learn more.
We look forward to and appreciate your comments
