There's waste in your operating budget that can be recovered ...if you be versed where to look and how to free it up. The waste is being caused by overpaying for equipment and services. From my exposure, it's not blameless a couple of dollars either. My clients are shocked to uncover they were wasting hundreds of tens (sometime millions) of hard dollars.
Although my expertise lies within one industry, the concepts we use to enhance the value you receive from a vendor works for any industry, product or maintenance. "Enhancing value" means lowering the hard dollar cost for creations or services while maintaining or improving vendor relevance support levels. When I initially meet with prospective clients, the form of being able to reduce imitation, print and fax costs, while at the carbon spell improving vendor performance is generally met with some smooth of skepticism. Statements are made same: "we already have the transcendent deal breeze, or I have a strong ! relationship with my vendor, I ken they are giving us the inimitable deal breeze."
in reality, the only way to really be schooled if you are receiving the highest viable value from your in progress vendor(s) is to obtain several pricing and relevance benchmarks (plus known as "facts points") to measure against your hip costs and employ levels.
What Are Your Options?
At that notch in my initial discussion with prospective clients, I am sometimes asked "can't I pure renegotiate with my mod vendor(s)"? You can, but what will that really give out you? objective now your prevalent vendor accomplishs cost and/or favor concessions, you will still not have any other facts points to evaluate the value you are receiving. I explain in another piece titled "Why Partnering with Vendors Does Not job" that the opposing motives you and your vendor have prevent you from getting the nonpareil value, out additional leg chore.
Sometimes I am told "I can issue my own ! solicitation for Proposal (RFP) and lower my costs myself. th! at will deliver the cost of your fee." That statement is exact, but the question to ask is; what is my true net return? To evaluate your true net return, you first have to determine the dollar amount you are fixed that internal efforts can reduce your topical hard dollar costs by.
Hopefully your procurement tract has a record of their results from other similar projects. If you do not have an internal track record engender unquestionable to evaluate the probability that their internal repercussion estimates are realistic. What previous perspicacity in that individual industry lends credibility to their estimates? hatch unfailing you have an understanding of the usefulness levels being provided by your common vendor(s) and that you can accurately describe what employment criteria you crave moving forward.
You too ache for to look at the labor costs needed to acclimate yourself to the industry for that project. Any industry is constantly changing to (hopefully) impro! ve its concoctions and services. From the last stage your organization immersed itself in research of that industry, multiplied details have changed. You must allow change for your procurement team to update themselves on the industry and vendor pool, as well as implementing the RFP itself. An estimate of completed one hundred labor hours is not uncommon for the average project.
Next, ask a performance-based consultant (for your target industry/cost area) what they believe your cost reduction budding is. Subtract their fee from the savings estimate and compare that to what you gather you can achieve internally minus your internal project labor costs.
It will be urgent for you to determine how accurate the consultant's projections are. You have already evaluated how realistic your internal projections are. Now ask what verifiable track record does the consultant have to assure you their cost reduction projection is accurate? Does the consultant provide a w! ritten guarantee of their projected performance and/or do they! have ve rifiable references? The incomparable performance guarantee is one that secures results and if the results are not delivered, the appropriateness fee is waived.
A gnarly performance-based consultant is similar in bounteous respects to a medical specialist. Unlike the general practitioner who requirements to appreciate a little about all of the human body, the specialist focuses on a pocket-sized area and is the unequivocal expert in that area. Your internal resources have to discern a little about a lot of product/services that you purchase and use to operate your pursuit. General practitioner maturity will allow a comparison of bid responses and/or proposals, but it will not allow you to distinguish if you are receiving the culminating value conceivable. The general practitioner will not have "industry insider" poop points that the specialist already knows and uses to ensure you receive the incomparable obtainable value.
Find out if any of your internal res! ources have back symbol inside the industry being evaluated, on the vendor side of the table, for at least five years. The pre-eminent previous performance struggle, to lift your internal team's analysis, will be from those that have held positions in sales, executive management (CEO, COO, and CFO) or as a craft squire within your targeted industry.
Now complete a side-by-side comparison of the pros and cons, as well as projected results for implementing an RFP using internal resources versus using a cost reduction consultant. Is the project being evaluated the area where you can realize your highest ROI? It will not be in your crowing interest to head down the path of an internal RFP if the net results (all cost considered) are better with an outsourced project or if that project would prevent you from completing another project with higher return.
It is considerable to note that you will not have the luxury of obtaining memorandums points through a formal ! bid or gathering proposals and suddenly implement a project wi! th a con sultant. Vendors do have a limit before they blacklist your organization as not being a serious buyer. You essentially have one shot when engaging an industry to reevaluate your costs, so chart your bits carefully.
At that bit in the process you can determine the true cost of the value enhancement project. Your choices are: 1) do everything, 2) implement the project internally and 3) engage a performance-based consultant. The true cost compares doing something to your internal efforts minus labor costs with the amount that a performance-based consultant projects, minus their fee. Is there a cost for doing something? If not, move on your next highest expense list. If so, what is the chief order to take to maximize the value you receive from vendors?
In summary, we have discussed the key steps you must take to ensure you receive the boss expedient value from your vendors. Look at your largest expense areas first and grind down through all the expense catego! ries you feel are significant for your organization. The steps listed above will bunk the similarly, regardless of industry. You have to determine if your internal resources have the industry knowledge, track record, and labor resources to implement and complete a limited "value enhancement" project.
After completing each of the steps outlined above and assessing the probable outcomes, you will have a reliable method to use to evaluate whether to engage outside assistance or use your internal resources to reduce your costs and enhancing vendor performance. Remember, only by using multiple proof points (obtained from "inside" the industry) to compare with your ruling cost and dispensation levels are you assured that you are truly receiving the highest kind on value from your vendors.
David Cantliffe is the President and Founder of BottomLine return LLC located in Louisville, Colorado. BottomLine supremacy is a performance-based, client advocacy consulting group! that specializes in reducing hard dollar costs for effigy, pr! int and fax expenses while simultaneously enhancing vendor usefulness support levels.
David has completed 18 years evidence as a sales representative within the copier industry combined with 5 years struggle as a dealership principal. You can download free email campaigns containing additional cost reduction ideas at http://www.bottomlineadv.com inside the resources tab, dispatch an e-junk letter with questions or contact David at 888.400.3600.
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