This is the last in a series of cuts under the current EU Roaming Regulations. The Commission will shortly publish new proposals for long term solutions to address the underlying lack of real competition for voice, data, and text roaming. The EU target is to get the difference between roaming and national tariffs close to zero by 2015.

Whilst all of this is good and welcome news, there may be a downside. Roaming has always been a highly profitable area for the Mobile Service Providers and as these margins are cut by legislation they are likely to retaliate with price increases elsewhere as they have done before. Users need to be very vigilant and check their mobile usage and policies very carefully to ensure  that they are getting the best possible value.

With all the various offers on landlines, mobiles and data changing so frequently, it is extremely difficult and often confusing for companies to keep abreast of all the changes and to know what will best suit their needs going forward. Expense Reduction Analysts can undertake a full independent review of your company’s communications usage; and utilise its expertise, purchasing influence and market knowledge to find you a bespoke solution that optmises your company’s communications future cost-benefit and service-quality trading position.

As predicted in April 2010, the OFCOM enforced reduction in Mobile Termination Rates (MTR) has resulted in the Mobile Networks increasing charges elsewhere to protect their profit margins.

The MTR is the amount that the Mobile Network can charge for inbound calls to their network and this has been reduced from 4.18p/min to 2.66p/min from April this year. Also the Networks have been hit by an EU ruling that limits the amounts that can be charged for roaming, but only within EU member states.

The hardest hit will be pay-as you-go customers with Vodafone increasing its’ standard call rate from 21p/min to 25p/min and texts from 10p to 12p. Similarly Orange is increasing its’ call rate from 20p/min to 25p/min.

However it is not just pay-as-you-go customers that are being impacted – Vodafone have also announced that on some contracts, the minimum charge on calls made outside of the normal monthly allowance will go up from 15p to 25p. Whilst this doesn’t seem too much of an issue if users keep with their monthly allowances, it should be remembered that most calls to Non-Geographic numbers (e.g. 0844, or 0871) are not included in the allowance so are chargeable.

Between them Vodafone and Orange have about half of the UK Mobile market and it is expected that O2 will follow suit with similar increases.

Over recent years there has been a huge growth in mobile usage and technology with the advent of “smart” phones and this has been coupled with a gradual reduction in mobile call and data rates. But the market is now saturated – there are no new sales to make as all the users that want a mobile phone now have one. The MTR and Roaming Rates have been reduced and will be reduced further over the next few years, so it seems likely that these price increases are the start of an upward trend in mobile costs.

But it is not all bad news, the MTR change should help landline users to reduce costs as the costs to call mobiles have dropped, however there are no guarantees that every landline service provider will pass on all or any of the reductions.

The communications team have produced a guide designed to provide you and your organisation with advice and hints on creating effective cost reduction programmes which retain and improve profit margins, click here to download it.

OFCOM receives around 450 complaints every day from consumers, mostly relating to billing problems, customer service and mis-selling.

The best supplier was Virgin with 0.21 complaints per 1000 customers relating to landline services and 0.20 complaints per 1000 customers relating to broadband.

TalkTalk was the worst supplier with 1.78 complaints per 1000 customers relating to landline services and 1.27 complaints per 1000 customers relating to broadband.

Ensuring quality of service and support is a crucial factor in Expense Reduction Analysts processes – as well as getting our clients the best possible prices of course, and as the above shows, all suppliers are not equal and that cheap headline rate may cost you in the long run.

The communications team have produced a guide designed to provide you and your organisation with advice and hints on creating effective cost reduction programmes which retain and improve profit margins.

Click here to download your copy of the free cost reduction guide

The National Pharmacy Association (NPA) is the representative body for the community pharmacy trade in the UK and, in addition to supplying a range of ancillary pharmacy support products at competitive prices, it seeks to support its members by influencing government policy and consumer opinion. It is also a leading provider of indemnity insurance and legal advice for community pharmacies.
The NPA wanted to ensure that it was achieving value for money across all areas of the business. Adrian Palmer, Director of Finance and Commerce at NPA, decided to call in Expense Reduction Analysts to undertake this wide-ranging review.

David Keating, the client relationship manager for the NPA, takes up the story: “Adrian asked us to conduct the review of many areas of expenditure simultaneously and to phase implementation, if complexity or supplier change dictated, over a longer period. We agreed an overall target of just below £300,000 of savings with no reduction in quality or service levels. We were able to form a bespoke team of analysts – all specialists in the industries that we were engaged to review – to perform the work in each area.

An objective and informed view of the expenditure being made

“At Expense Reduction Analysts, as part of our supplier management process, we work closely with the incumbents to determine if they are providing value for money and if there are opportunities for them to develop their solutions to the benefit of our client. And that is what we have achieved with the NPA in many cases. There have been limited changes to the suppliers, and we are continuing to work with them on an ongoing basis to ensure that the enhanced value – as well as the quality of product and the service provision – is maintained and enhanced over time.

“We judge supplier performance through the purchase data from invoices, in conjunction with stakeholder interviews to determine the required quality and service levels. This allows an objective and informed view of the expenditure being made, and the quality and service levels thereby procured. In fact, in three or four categories, we concluded that the NPA were already achieving best value – so they received the peace of mind of a positive outcome from this independent audit. In some categories, though, we found that a new approach was warranted: in Copiers, for instance, we recommended restructuring the contract, which led to a 59% saving.

“In fact, we completed the programme of work in six months, implementing these projects to a schedule that allowed the NPA to accommodate the changes smoothly into their workflow. This has also allowed the NPA to consolidate their supply base, thereby achieving further economies as a result.

“We see the successful completion of these projects as the first step in a long term partnership with the NPA, who have now engaged us on a number of other areas of their business. We take this as a compliment to our work so far and look forward to working with the NPA in the coming months and years.”

Click here to download a copy of this delighted client case study

The research, for example, shows that standardised sourcing processes and regular tracking of supplier compliance with service level agreements are much more likely to be well established within procurement leaders, and that best-in-class organisations keep a close eye on an agreed set of KPIs to ensure not only that the negotiated savings do materialise, but also that they are being preserved over time.

So which strategies do the leaders apply? The Aberdeen Group’s research shows that 41% of leaders as opposed to only 18% of laggards have increased the volume of spend managed by a dedicated Procurement function.  This certainly makes sense, as in most organisations the same or similar goods and services may be sourced by different functions, often even from the same suppliers, missing out on any volume discounts that could be negotiated. On the other hand there is the automation of manual procurement processes: While favoured by 28% of laggards, only 13% of best-in-class buyers have taken such measures. What does this tell us? While eProcurement solutions potentially have an important role to play in corporate sourcing processes, the technology available cannot be a substitute for alignment of procurement with the overall corporate strategy, old-fashioned market research and one-to-one supplier negotiations.

Standardisation of sourcing processes and contracts are other key ingredients which distinguish the leaders. 72% of the most successful procurement teams have adopted such measures. And the results achieved, according to the study, seem to speak for themselves: Organisations with standardised sourcing processes achieve savings almost a quarter higher than their peers, while standardised contracts resulted in 42% higher savings, since this directly relates to contractually agreed discounts being correctly quoted on supplier invoices and on variations being detected during the invoice approval process.

Another vital aspect to purchasing performance improvement is the spend analysis. While this is likely to be time consuming, the collection and systematic assessment of actual procurement data allows to identify the areas in which focussed negotiations and standardised processes are likely to yield the best results. In the Aberdeen Group survey, organisations that had the ability to classify and cleanse their spend data subsequently identified 23% more savings than their peers. It can’t surprise, therefore, that spend analysis achieved a score of 3.51 on a scale of 1 to 5 as the second most important area for performance improvement, beaten only by interdepartmental collaboration with 3.57.

In part II of this blog I will outline 9 steps which, according to the Aberdeen Group study, will help transform underperforming procurement teams.

See all Logistics Team blogs – Click Here

When Expense Reduction Analysts’ consultant Kelly Mordecai met with Chris Wade, Director of Finance and Simon Taylor, Management Services & Facilities Manager of ATOC, the benefits of an Expense Reduction Analysts’ profit improvement programme with its no risk fee structure, certainly seemed to be just the ticket! Chris Wade comments, “As the umbrella body for the TOCs in the UK, and funded by these companies, ATOC clearly has a duty to ensure that it is obtaining best value when expending the TOCs’ subscriptions.

From the first discussions with Kelly, we could clearly see the justification and comfort factor to our members of the Profit improvement programme, particularly given Expense Reduction Analysts’ expertise in certain areas of expenditure.” Kelly agreed with ATOC that the categories to be examined would be e-mail service, landline and mobile communications, stationery and print. Kelly then engaged fellow Expense Reduction Analysts’ consultant Nigel Rosehill, with his specialist knowledge of the communications sector, to assist him with the project.

ATOC’s Simon Taylor was impressed by the way Kelly and Nigel worked as a real team, “As the projects progressed it became evident that there were several complexities in the services provided by the existing suppliers. These required detailed analysis and fact finding, combined with sensitive but firm negotiation. As well as their invaluable expertise in the sectors involved, their experience of dealing with existing suppliers was quite evident. We were always kept informed of the key points and involved where particular strategic issues demanded. We were provided with the findings of the assessment to enable us to judge whether our existing suppliers could provide good value in the future. Indeed, our e-mail service received significant enhancements as well as reduced overheads!”

Expense Reduction Analysts’ consultant Nigel Rosehill explains, “The communications assignments were extremely challenging because there were service-based issues particular to this industry. However, after extensive discussions and analysis, we were able to benchmark current comparative profit improvement levels in the marketplace and use this as a basis to negotiate with current suppliers on behalf of ATOC. This resulted in retention of both landline and e-mail service providers at significantly improved profits.” The next step was to analyse mobile phones. Although no significant profits could be found, the evaluation of this category enabled Kelly and Nigel to provide ATOC with the peace of mind that they were obtaining best value in this area. Chris Wade concludes, “All projects have now been implemented and ongoing profits are being realised, pretty much on target. A change of suppliers has since led to further reductions of 25% on stationery and over 50% on print, allied with the renegotiated rates on our communications profit improvements.”

To sum up the Expense Reduction Analysts’ service, Kelly Mordecai adds, “We were able to deliver a range of beneficial alternatives, which have enabled ATOC to select the most appropriate choice of supplier in each area of expenditure, utilising a combination of retention and change where justified.”

Chris Wade Director of Finance for ATOC was very impressed with Expense Reduction Analysts’ specialist Insurance team, ERAICM “I would recommend ERAICM without hesitation. The approach of the ERAICM team has been very professional and they handled our renewal process in its entirety. They are very knowledgeable about the insurance market and how the whole industry operates and this insight gave us a valuable advantage. In fact, one of the main benefits was that they were able to better present our risk profile to the insurers by reviewing where our risks really lay and this had a massive impact in reducing the premium.”

In many businesses and organisations strategic costs are controlled by procurement professionals in a purchasing or buying department. But who buys the non-strategic services and products – the overheads?

In our experience, except in the largest companies, these are either bought by the accounts or purchasing departments or farmed out to relevant service departments. If the latter, while these individuals may well be providing a great service, are they always getting the best value?

Ever heard the statement “This isn’t about cost”? Well no it isn’t. But it ought always to be about value – the balance between product and/or service quality and cost.

Take the example of a typical IT department that is responsible for both specifying and buying IT equipment and support. Does the department include or have a link to a professional purchasing executive within the organisation? If not, how can they be expected to achieve best value?

And if the supply is being bought by accountants or procurement executives do they have genuine expertise in all significant areas of cost. Probably not. Nor is it likely to be commercially viable to go out and recruit such purchasing experts.

That’s the biggest reason why by deploying category experts on behalf of our clients Expense Reduction Analysts are able to achieve an average saving across all categories of 19.7%; and often in areas where the category of expense has already been reviewed internally.

It’s not that internal managers are not doing a good job, it’s just that either procurement isn’t their main function or if it is, they lack the expertise in the particular cost category.

But how do you start putting SRM in to practice? Perhaps one of the best places to start is by asking the “who”, “why”, “how”, “with what” and “when” questions.

• Who? Any successful SRM programme starts with selecting the right partners. A supplier may be key to you, but are you key to them? Unless both customer and supplier sees the other as a strategic partner then any SRM programme is likely to fail. 
• Why? Answering this defined the business case for SRM which will help both sides to grow. This should cover the purpose of the relationship, its mission and its objectives. Typically this is done at the start of the process and revisited annually. 
• How? This determines the specific initiatives that both parties will undertake jointly in order to grow by proactively filling a pipeline of tasks that help to meet the goals of each organisation. More often than not each party has ideas on how to improve the others business, only never thought to ask.
• With what? And when? Covering roles and responsibilities for delivering the improvement initiatives both parties have decided, including project and programme management plans and milestones. Key to success is putting someone from each party, ideally at executive or board level, in place as sponsors. These individuals are then in a position to deal with any issues that may arise.

As Premier Foods and British Sugar found, a successful SRM programme develops more improvement ideas than there are resources to implement. And in the end, their particular relationship has become more than just about the supply of sugar.

Time and time again at Expense Reduction Analysts, we have demonstrated to our clients how managing suppliers works. It’s important to us. It should be important to everyone.

Expense Reduction Analysts fix great profits for Infoteam

With 400 per cent growth during the last three years, Cornwall-based Infoteam is a rare breed of business that continues to go from strength to strength even during these tough economic times, but effective cost management is what really counts, according to the company’s Financial Director, Simon Harland.

“Few companies are lucky enough to thrive during a recession,” says Simon, “but the secret to our survival – during good times or bad – has been knowing our business, providing a good service and keeping on top of our costs. Over the next two years we’re on target to make savings that are the equivalent of finding £1.5m in new sales, so it’s an important part of our growth strategy.”

Infoteam, established in 1996, repairs and refurbishes modern-day essentials such as games consoles, laptops and PDAs on behalf of global brands including Sony, Acer, Sun Microsystems and Toshiba. The company grew steadily until, in 2005, it employed 150 staff and had an annual turnover of £8.5m. Then in 2006 business boomed. “We experienced massive growth in a very short time – linked to the increase in electronic goods and after sales service. Now we have over 700 employees, a turnover of £30-£40m and we’re still growing,” continued Simon. Infoteam is now the UK’s market leader in logistics and storage of electronic goods in need of repair and has added a call centre to its list of services. But for all their success Simon is keen to emphasise therole that the company’s cost conscious culture has had on its stability and growth.

He continued: “We’ve always tried to get the best price and service from suppliers and so it made sense to meet with cost management experts, Expense Reduction Analysts, to examine ways to make us more cost efficient. “We identified cost areas where we thought it possible to make savings, including stationery, which we had recently spent 18 months researching ourselves. I was shocked to learn we could make further savings of 37 per cent. Furthermore, our insurance premiums now are less than they were three years ago when we had fewer employees and liabilities. “We’ve already saved £20,000 and are on target to achieve savings of over £120,000 in areas including energy, IT, communications, packaging and waste over the next two years. To achieve this you need to have complete understanding of supply chains and good industry contacts. “A lot of companies will think that they already have good deals, but I don’t know of a company that can’t save money. By examining your costs you discover that at the very worst you’ve already got the best price – which is a reassuring health check that confirms you’re doing something right.” David Brassington, Expense Reduction

Analysts consultant, said: “Analysing whether you’re paying for more than you need, creating a cost conscious culture and questioning increased charges are all examples of ways that cost savings can be made and they’re more efficient than simply reducing headcount, for example. “Savings go straight on the bottom line and make a positive impact on the balance sheet in a relative short space of time. £120,000 of savings are just the start for Infoteam – these will increase over the next two years as new projects come online.”