Expense ReductionAnalysts

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A guide to reducing non-core operating costsin the economic downturn

Issue 3: Back Office Supplies

Introduction

02 Introduction

Whether it’s the cost of equipment itself orthe way your employees use it, a contractthat doesn’t truly reflect your requirementsor a culture of waste in the organisation – all of these can be adding unnecessarily to your expenditure and reducing your ability to streamline the business.

This guide - the third in our series looking atdifferent areas of cost reduction - aims toprovide a range of practical advice and examples from experts in the field to helpensure your business is managing its costseffectively and efficiently.

It includes tips and advice on the following areas:

• Photocopiers – are you deriving maximum value and efficiency from this workhorse of the modern office?

• Telecommunications – the array of tariffs, and new technology, products and serviceson offer demand a strategic and well-informed approach

• Postage – even in the electronic age, most businesses have a postal requirement but the deregulated market needs careful navigation

Although not up there with the major strategic business expenditurecategories such as marketing, R&D or headcount, nevertheless thesystems and supplies that keep your office running day by day canhave a significant impact on efficiency and profitability.

Photocopiers

Photocopiers 03

1 Fit for purposeIt goes without saying that all office equipment should be carefully selected to make sure it performs the functions you need it to. However, in the photocopier market, it’s particularly easy to over-specify.

Conduct an analysis of your actual usageover the past six months (rather than guessing what you think you need or wouldlike!) and ensure that the machine youchoose is not too big – meaning you won’tderive its full value – nor too small, leadingto compromised quality and efficiency output.

2 Review lease and service agreementsMost companies lease their photocopyingequipment so make sure you fully under-stand the terms of the lease – in particularhow long you’re signing up for – and ensurethat any service agreement for the machinedoes not last longer than the lease.

3 Instil a careful copying cultureA number of very simple changes in copyingculture amongst your team can deliver significant savings:

• Encourage as much use as possible of the ‘duplex’ (double-sided) facility to cut down on paper use. A machine printing 30,000 pages per month would use 360 fewer reams of paper a year if all pages were double sided

• Ensure that the default setting on your copier is set to mono, with colour only being used if specifically selected. On average, mono pages are 90 per cent cheaper than colour

• Use the print function on a photocopier (most have them these days) rather than a desktop printer for large print jobs. The page costs for a photocopier will be up to 70 per cent less than a desktop printer

• Check waste paper bins next to copiers andprinters at the end of each day to identify and curb wasteful or unnecessary printing

Photocopiers are one of the most heavily-used pieces of officeequipment, often performing a vital role across a range of business functions both internal and external. Marketing, finance and general administration departments will all have occasion to call on the copier and so it’s an area of expenditure worth getting right, says expert Brian Pinner.

Telecommunications

04 Telecommunications

Telecommunications in various forms have now become an essentialpart of every organisation, says Brian Holmes. However, since theprivatisation of BT and the explosion in the mobile market, the constantly changing dynamics of the market present an ongoingchallenge to businesses, which they can’t afford to ignore.

1 Analyse your trafficFixed line, voice, data, mobile…your businesswill be communicating in a range of differentmodes and each may be charged in a different way or at a different rate.

It’s impossible to be sure you’re getting thebest deal unless you have a detailed analysisof all your usage broken down by category.Crucially, this breakdown should not just betelling you the volume of calls within eachcategory but also the duration per category.But this may be further complicated by set-up charges, minimum charges and capping.

Only by scrutinising this level of data andchecking for consistency across differentbills against the known tariffs will you beable to check you’re paying the correct rate in each case.

“Knowing that you made 12,507 callslast month and the cost was £467.32allows you to calculate the averagecost of a call at £0.037.

But without knowing the call durations, you have no way of checking that you’re being charged at the right rate.”

2 Understand your requirementsNot only is there a bewildering array of tariffsavailable but also an increasing number ofmodes of transferring voice and data to theoutside world. All of this choice means that a simple comparison of rates is no longer sufficient to ensure the best deal.

Do you want call capping, bundles or a fixedmonthly spend? Will it be via a good old analogue line, or Broadband ADSL, Voice-over-IP (VOIP) or 3G?

Know what you want in terms of functionality – not just cost - and understand the options available to ensure you select the right one for your business needs.

Telecommunications 05

Through a lack of resource, a multi-site charity based in the UKwas losing potential revenue by not answering all incoming calls.We assisted by quantifying call volumes and patterns and thentendering to appropriate call centre operations to provide theclient with a range of impartial options to improve efficiency.

3 Stay ahead of the gameAs technologies and services continue tomerge, the certainty and cost control onceoffered by a long-term contract is no longeras valuable and, in fact, has the potential to lock companies into inflexible or costlyarrangements which preclude them fromtaking advantage of the newest developments. It is not unusual for contractsto have automatic rollover clauses and soeven though you only signed up for 12months, unless you cancel in time you couldbe committed to another 12 months.

It is now essential that businesses preparewell in advance of contract renewal dates by reviewing communications requirementsregularly and planning strategies which avoid incurring unnecessary costs.

Don’t reduce your options by leaving reviewsand supplier negotiations too late.

4 Know the marketNetwork operators and suppliers are constantly updating their products andservices to take account of the changingmarket. Keeping up to date with these developments is a full time job but a crucialone if you are to be sure of the best deal.

Make sure you have the best market intelligence at all times.

A manufacturing company in Devon was locked into a cable service provider infrastructure and believed that its rates couldn’t be improved. Expense Reduction Analysts negotiated with the incumbent supplier and realised a 24 per cent saving.

Postage

06 Postage

Every company incurs cost on postage. Whilst it’s true that many organisations are making increasing use of email, mail expert Nadim Vanderman says post remains an essential way of sending a whole host of material such as invoices, statements, brochures and marketing material. Here are his tips for making the most of your postal budget.

1 Develop your post profileIn 2006, the postal market became deregulated and the Royal Mail’s monopolyended. Whilst Royal Mail is still the dominant player, the deregulated marketoffers a wide range of different products,services and pricing structures from variousdifferent suppliers.

With so much choice, the key to managingyour postage cost is to evaluate your situa-tion and develop an accurate profile of yourpostal usage. You need to ask: how muchmail is being sent as letter, large letter andpacket format? How much mail is being sentoverseas? How much mail is being sent Special Delivery?

Armed with this level of information on yourusage, you can then assess whether you areusing the optimum service for your needs.

2 Pricing In ProportionWith the introduction of Pricing In Proportion,mail is now charged on the basis of weightand size. Make sure that you don’t send singlesheets of paper in C4 envelopes. These will becharged at large letter rate, when they couldbe sent as letters, costing you 38 per centmore than necessary.

3 Be ‘frank’ about your needsMany organisations send their mail usingfranking machines. Whilst this is undoubtedlya flexible way of sending mail, beware of hidden costs such as topping-up charges, tariff rate chips and ink cartridges which may detract from their value. Indeed, youmay want to ask the question, do I need a franking machine at all?

07

Expense Reduction Analystsconducted an extensive review of postage costs for a major public sector organisation with about half amillion members. Nearly a yearafter implementation, auditshave shown a saving of 18 percent including, at the last audit,the identification of a major invoicing error by the RoyalMail which resulted in a fivefigure credit note being issued.

4 Get to know new providersWith the ending of the Royal Mail monopoly,there are many new providers in the market-place. But be careful, as they don’t all carrythe full range of services provided by theRoyal Mail and they have minimum collections quantities.

The most significant difference is that theycharge VAT (postage through Royal Mail is anexempt supply), which may adversely affectfinancial service companies, charities andother organisations unable to recover VAT.

Expense Reduction Analysts is the world’slargest cost management consultancy and focuses on reducing non-core operating costs for private, not-for-profit and publicsector organisations.

Handling an annual supplier spend of millions of pounds on behalf of clients in all sectors, the consultants at Expense Reduction Analysts use their significant purchasing influence to achieve optimumvalue from suppliers, often successfully retaining incumbents and using expert analysis and market intelligence to combat ‘contract fatigue’.

Expense Reduction Analysts has 150+consultants across the UK, specialising in more than 100 non-core business expenditure categories.

Other topics covered in our series of cost reduction guides include:

Issue 1 – Property and PremisesIssue 2 – Banking and Finance

For more information contact Expense Reduction Analysts on: 02380 829 737

or visit our website at: www.erauk.net

Expense ReductionAnalysts

www.erauk.net

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