In a report by Roger Trapp, Managing Director of Expense Reduction Analysts, Robert Allison comments on identifying opportunities in the recession:

Southampton based Expense Reduction Analysts looks well-placed to prosper in the current business environment. Robert Allison reports is up 25 per cent on the previous 12 months.

Three factors are behind the success, he says. First, without a doubt, procurement is much more important for clients than it has been in the past, given the economic conditions. However, the group also practises what it preaches in keeping costs under control. Moreover, a lot of savings have been reinvested in areas, such as marketing, where – again because of the recession – there is great value to be had.

Third, the environment is supporting what we do. For example, the cutbacks in public sectors will inevitably have effects on private companies, so there is work to be done by Expense Reduction Analysts in reducing these companies’ costs in order to keep them viable.

What that is – essentially – is driving costs out of supply chains to make companies more efficient and competitive. Large companies typically use international firms of specialists to advise on this, while small companies either don’t do it at all or use single consultants.

By helping companies install “proper supplier management techniques” it is enabling them not to spend more but to spend better, explains Allison. And, have battened down the hatches, some of these businesses are now feeling confident enough to take a few risks.

It’s about getting the timing right. It’s about moving first.

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.”

The Department for Transport has recently published its annual Road Freight Transport Statistics Bulletin 2009, and interpreting the figures provides a fascinating analysis of the changes occurring in the Distribution Sector. This year’s publication is significant in that not only does it show the impact of recession when compared with 2008, but also as the 20^th edition, showing the fundamental changes over two decades.

Unsurprisingly, total tonnage uplifted declined markedly in 2009 compared to the previous year, but the balance of goods moved between different sectors has continued recent trends.  The volume of food and drink products has been at a stable 370 million tonnes for three years, after a fairly constant upward trend, whereas all other categories declined, noticeably Bulk Products, which fell from 620 million tonnes to 440 million tonnes year on year. Perhaps worryingly for British Manufacturing, this compares with levels of over 600 million tonnes being uplifted in this sector even during the recession years of the early nineteen nineties.

Analysis of usage by vehicle type shows artics moving 58% of goods compared to just 40% in 1989.  Not only does this show the impact of increased vehicle weights on improving efficiencies, but also goes some way to explain why unit haulage rates have failed to keep pace with inflation, whilst still allowing haulage businesses to continue.

However, from a cost analysts’ perspective, the most interesting statistic must be the change in the proportion of goods being moved by own-account vehicles versus 3^rd party hire and reward hauliers. In 1989, hire and reward operators uplifted 60% of goods (by weight), declining slightly to 57% in 1991 as the recession bit. However, with a trend for more companies outsourcing logistics functions, this then peaked to 67% in 2001. A gradual decline to 61% in 2007 has then been followed by big drops to 51% in 2009. Actual volumes for the hire and reward centre have dropped from a peak of 1,145m tonnes in 2007 to just 723m tonnes in 2009 – a 47% drop ! Undoubtedly, the impact has been large numbers of providers disappearing from the scene with record administrations and insolvencies in the sector, and the survivors following rigorous cost cutting programmes and capacity reductions. For the future, however, from the service procurors perspective, this means reduced competition as hopefully volumes begin to recover.

Although the own account sector suffered a small volume reduction to 699 million tonnes, this was still the third highest volume moved in this sector since 1989. However, the sector moved its goods further than any previous year and therefore recorded its highest ever tonne kilometre measure. The re-emergence of the own account sector must be a relief to suppliers of fleet services: our internal data shows that margins charged on fleet supplies (eg fuel, tyres, maintenance, fleet insurance, etc.) are consistently higher than being achieved by the same suppliers to the hire and reward sector.

Therefore, despite the fact that own account operators are working their fleets harder, there are still major opportunities to improve their cost base through detailed effective procurement reviews.

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“Apart from the financial rewards of reducing expenditure, our work with Neill Summerfield and his team in securing service level agreements and key performance indicators from suppliers has encouraged people within the Academy to be more focused on working pro-actively to ensure that we receive the best possible service from our supplier base”

Importantly the decision to engage Neill Summerfield and his team of cost management consultants was supported by the Executive Management Board and the Board of Trustees. Progress in finding sustainable extra profits for the RAD is reported to both teams on a monthly basis.

IBB Solicitors identify £142,000 savings

IBB Solicitors is West London’s leading law firm and recognised in Legal 500 as a South East regional heavyweight. A full service law firm handling complex legal work for both businesses and individuals, IBB Solicitors is headquartered in Uxbridge, Middlesex with offices in Chesham, Buckinghamshire.

The beginning of the relationship between IBB Solicitors and Expense Reduction Analysts was rather unusual, as David Rogers explains: “One of my colleagues had done some work at IBB a long time ago. Then, in 2008, with the recession looming, the partners very sensibly considered various cost saving measures, and the Finance Director, Martyn Green, remembered us. IBB rang Expense Reduction Analysts Group Office and I was fortunate enough to be asked to respond to the enquiry.

“I must say that IBB were a joy to deal with from the outset, and we quickly agreed to start by looking at three categories – Document Storage, Office Supplies and Business Print. My colleague, Derek Hodd, did a fine job and achieved savings of between 39 and 54 percent on each.

“Indeed, I have been fortunate, as the relationship has progressed, to be able to call upon the services of others in the Expense Reduction Analysts network – Nadim Vanderman achieved significant savings in Postage and DX Costs, and Brian Pinner joined the project to work on Photocopiers.”

The savings that Expense Reduction Analysts achieve is often down to our thorough examination of the client’s spend, and our ability to consider the whole spectrum of available options.

IBB’s Mobile Communications project was a case in point. Here, detailed analysis of every call made prompted us to recommend that IBB completely reverse the structure of their mobile phone package: where before they had enjoyed a low handset rental charge, but had paid for every call, we now suggested that they switch to a higher handset rental with a bundle of pre-paid call-time. The result was a 36% saving.

In all, the nine categories that Expense Reduction Analysts worked on for IBB yielded overall savings of £142,000, a figure that should be seen in the context of the recession.

As Martyn Green, Finance Director at IBB Solicitors, explains, Expense Reduction Analysts were a valuable partner at such a time: “Any business faced with a recession has to take action, and we were fortunate to form a strong partnership with Expense Reduction Analysts when we did. The savings that David Rogers and his team have achieved have been very helpful. They have assisted the firm in planning for the future by feeding their savings forecasts into our budget.”

Today’s budget changed the “net lending targets” for RBS and Lloyds to “gross lending targets” instead. Is it just political semantics and posturing, or is it a practical move? Time will tell …..but as an ex-banker used to targets…….I think it could turn out to be the latter.

Reading Robert Peston’s blog on the bbc’s website today http://www.bbc.co.uk/blogs/thereporters/robertpeston/2010/03/chancellor_moves_bank_lending.html he provides a cogent analysis of just why this might be a smart move. He highlights that the banks can now conceivably meet stretching lending targets (and these are circa 20% greater than they achieved last year) whilst also cleaning up and shrinking their overall balance sheets.

So what at first glance looked to many as a semantic fudge, may turn out to be a touch of insight. What is for sure, is that we do need business to have access to increased credit if the recovery is going to be soundly based. A credit crunch was the most potent symbol of the crash and – to date – most of us haven’t really seen it improving for businesses.

 A number of things can be done which, if started soon enough, can help prevent the need for a compulsory redundancy situation arising.

 Help prevent compulsory redundancy by

• Stop recruitment
• Ban overtime
• Lay off agency workers
• Freeze pay increases
• Short time working *
• Appeal for volunteers
• Agree salary cuts *
• Reduce costs

 * May be contrary to, or in direct breach of, an employee’s contract of employment – seek advice where necessary

 In the event that disputes arise, tribunals will look favourably upon companies that have taken the above actions prior to making redundancies, having taken all reasonable steps to prevent it.

 Reducing costs can have a significant effect on a Company’s profitability and ability to ride out a temporary downturn in business. A modest £20k per annum saving can pay someone’s salary and significantly improve cash flow. For more on the effects of profit and turnover – see my previous blog by clicking the link below.

http://www.expense-reduction.co.uk/2010/01/can-profit-replace-turnover/

Initial moves were made in Europe last week to significantly increase the amount paid

in maternity benefits to all new mothers.

On 24 February the Women’s Rights Committee voted to increase the statutory

maternity allowance for all mothers in the EU to include a minimum of 20 weeks of full

pay. The proposals would have the effect of harmonising all member states’ maternity

laws to a level that is currently significantly more generous that that which is currently

offered to new mothers in the UK.

So far, the proposal has met with almost universal dismay from business leaders, who

are concerned that the total cost of this – somewhere between £1.5bn and £2bn –

would have to be met by either the UK taxpayer or businesses. The UK government is

also disappointed by these proposals as it is felt that the economy cannot support such

a generous measure at this fragile time and, in any event, the UK maternity package is

among the most favourable in Europe.

Aside from the cost, the concern is that these measures would discourage businesses

from employing women of childbearing age. If this proves to be the case it would

undermine the intention of the proposals by making it harder for women and new

mothers to thrive in the workplace.

Final ratification of the proposals is still a long way off, however, as the measures still

need to be approved by the full European Parliament and the Council of Ministers,

where the UK has no absolute veto over employment matters. It is estimated that,

assuming the scheme is approved, it would take approximately a year to 18 months to

be made law in the UK.

A report from the Chartered Management Institute (CMI) found that over 225,000 managers quit their jobs in the year to the end of January, despite the possibility of unemployment and a difficult job market.

The report shows that that 4.7% of members covered by its annual survey resigned from their jobs, up from 4.5% last year.

Asked what motivated this desire to change jobs, 53.8% of employers questioned – more than half – admitted that restructuring and job insecurity were a key reason for staff leaving their positions.

Contributing factors suggested by employers in the survey were a failure on the part of firms to ‘offer career opportunities and training’, and the increasing influence of head-hunters and recruitment consultants.

The survey also implies that employers are failing to persuade staff to stay, with requests for ‘internal transfers’ – an alternative to resignation – dropping by 2.2% since last year.

Ruth Spellman, chief executive of the CMI, comments: “A year ago employers were looking at job transfers as a way of halting growth of the dole queue. However, with the latest figures showing that staff are prepared to run the risk of unemployment by jumping ship, questions must be asked about employee engagement levels in organisations up and down the country.

The CMI also said that its members were finding it hard to recruit staff, despite the latest figures showing that UK unemployment currently stands at 2.47 million.

Filling vacancies is a problem for 46% of firms, with 77% saying they cannot get people with the skills they want.

Telecoms giant BT is the latest firm to credit procurement for cutting costs during difficult economic conditions.

In the company’s second quarter results for the three months ended 30 September, BT said it was making good progress with cost reduction efforts, having already saved more than £900 million of its £1 billion target for 2009/10. It now expects to save at least £1.5 billion by the end of March next year.

BT reported a 6 month profit of £547 million: Cost reduction of £900 million p.a. has clearly had a massive impact on the company’s profitability. Cost reduction can significantly boost profitability, especially in the current climate – no matter how strong the firm.

Article by By Jake Kanter – Supply Management.com.