How are you keeping costs and expenses down this year?

June 3rd, 2022

What categories are you actually sourcing in 2022? Are they the right ones?

 

Today’s post is by Ronald D. Southard, CEO at SafeSourcing Inc.

The role of all for profit businesses is to make a profit. In a perfect world, you will increase sales, reduce cost of goods, improve gross margin, and reduce expenses. Since we do not have a perfect world ever, you will ask your finance team to make up a bunch of excuses based on a variety of global conidiations such as inflation, recession, war, supply chain issues, goodwill, weather, and anything else that will cause analysist to not devalue your shareholder value after missing your quarterly or annual plan numbers. Tell me I am lying! I am already laughing.

The question I have is what questions have you been asking of your finance and procurement teams during the year? Do you just believe what they are telling you? If so, I might have a bridge that be be resold in Brooklyn if you are interested.

Here is the thing, I agree that we have issues. However, that does not mean that there is not money to be saved and a lot of it. The trick is to understand the markets and commodities well enough to source what you can save money on while also trying to mitigate cost increases where there are factual issues.

There are categories whose prices are down year over year 2021 vs 2022. An example might be mobile phone technology, audio technology and even TV’s. I know all these items are used in retail stores. So, are you taking advantage of these items in your technology budget or just believing that chips are hard to get so technology is not a good category to source? If you are opening new stores or upgrading existing stores, I would suggest you take a serious look. In your cost of goods area there are improvements in some produce subcategories and protein subcategories. Do not just believe your supplier of your procurement team. If your pricing has gone up 8% on commodities, have you just accepted it or have you challenged it and kept increases to a minimum.

At SafeSourcing we stay abreast of all areas of impact in the cost of all categories. We understand global and regional issues as well as where there may be alternatives sources of supply. Here’s a couple of examples.

  • Bottled Water 30.7% below current cost.
  • Print Fulfillment 36.04% below current cost
  • Construction Windows and Doors 13.84% below current cost
  • Refrigeration 22.61% below current cost
  • Many more examples upon request

If you lack specific detailed product and commodity knowledge or only source certain categories less than annually, and would like to understand current market drivers, please contact a SafeSourcing customer services associate.

 

 

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