Driving down costs for the MC Group

Established for over 30 years, MC Group supplies transport vehicles for organisations across a range of sectors, including construction, waste, retail distribution, local authorities and emergency services.

When the company enlisted the help of Expense Reduction Analysts, Finance Director Peter Booth was keen to find out how they could be making the most of opportunities to reduce costs.

“We’ve always been a fairly cost conscious company, but I’m aware that it’s quite easy to forget where money is being spent,” he explained. “Even in instances where we’ve chosen to retain the same supplier, it’s been reassuring to know that we have been doing things the right way.”

The review began with ERA consultant Steve Parrott looking at MC Group’s laundered work wear provision. Under the two expiring contracts, rental and laundry services were charged at a combined price on the basis of three changes per week.

Steve worked with the company to define the specification and successfully tendered the new three-year contract, which was implemented with a new single supplier.

With the new contract in place, ERA analysed on an in-depth employee-by-employee basis, the actual utilisation of garments over the first six months, which identified that most employees were changing garments far less frequently than expected or planned.

“Trucks are cleaner these days and so much of what the workers deal with is electronic, and there really isn’t a need for staff to change their overalls quite so often,” explained ERA consultant Paul Wheatley.

“While their work wear contract isn’t up for renewal until the end of the three years, MC Group can start taking steps that will stand them in good stead to negotiate a more appropriate agreement in future.”

For example, with an identified surplus of garments, there is less need to add overalls to the fleet for new staff who can use existing supplies. This in turn will minimise the residual value at contract renewal.

Overall, MC Group made an annual saving of 20 per cent on its work wear spend through the review and achieved a similar rate of saving (18 per cent) on its merchant card fees. Here, the incumbent supplier had subtly changed the way in which transactions were charged, resulting in a notable increase in ‘hidden’ costs.

Once ERA consultant Paul Davidson identified this, MC Group switched to an alternative supplier that has provided a better quality service at a more cost effective rate. Furthermore, the new supplier offers an online management information system that is quick and easy to use, which saves the company time.

Other areas looked at as part of MC Group’s cost review included gas and electricity, where savings of 6 per cent were made for the former and two separate phases of the electricity review resulted in savings of 5 and 17 per cent.