We had a fascinating story shared with us recently of a national company that decided to check on some non-inventory costs. For the ‘sake of efficiency’, they authorise their State Managers to engage with local suppliers for non-core products and services.
When the Market Tightens
Local Manager discretion is all well and good when times are great and profits are flowing but in this current business environment, they decided to do a review to check for any opportunities to ‘trim the fat’.
Fair Market Value
The first thing they focused on was the commercial cleaning contractors for each of the 7 State office/warehouse locations. Given some of their remote locations, there was no national provider available, but they wanted to know they were paying a fair market price from each of the local suppliers.
The Results
Every site was paying a different price. Five of the State sites were paying roughly the same cost per square meter and what seemed to represent fair market value. One site was paying nearly double the price of the others and when approached with a ‘please explain’, the State Manager vigorously defended the decision to use that supplier. He explained that they do extra work when spills occur and have gone above and beyond on multiple occasions, and he did not want to consider an alternate supplier.
Glad to Get Rid of Them
The seventh site was paying nearly 4 times what had now been confirmed as ‘fair pricing’ and when the relevant State Manager was quizzed why they were paying so much, he said he would be ‘happy to get rid of them’. He said they had been unreliable at times and only had their contract renewed because he was too busy with other higher priorities at the time when the decision was made to keep them on.
The Savings & the ROI
This first review of whether they were paying fair market value had generated $37K+ in annual savings and proven to them that there were definitely some additional profits to be banked by reviewing their non-core products and services.
Using Triber to evaluate and negotiate with your key suppliers, you can expect to save at least 5%. For every $1M of annual purchases, a 5% savings adds $50,000+ extra straight to your bottom line. Triber's tools ensure you always pay fair market value and reduce your supply side risk.
Talk to us via request contact about our easy, fast and affordable tool to evaluate and negotiate with your preferred and prequalified suppliers to better manage your expenses.
