Press Room
For Immediate Release
Quicker, Better, Wiser - Improve Your Purchasing Process-Now
By Gene Marks, Reprinted from May 20, 2009
Small-business owners overpay
for lots of stuff. Healthy economies mask those mistakes;
recessions aggravate them like old wounds.
Why do we overpay? The real
reason (though most of us won’t admit it): “Many
business owners are resistant to changing the purchasing
process,” says Gary Friedman, president, of Cost
Containment Specialists, based in Dayton, Ohio. “People
say, ‘I’m too busy right now.’ It’s
really up to the business owner to determine how committed
he or she is to maximizing profits.”
There you have it: All of us could
be doing something to shrink line items like freight,
utilities, telecommunications, sanitation, even office
supplies-but we don’t. It’s not that we’re
getting gouged by vendors, or that we’re poor
negotiators. It’s that we’re too set in
our ways (or maybe just too lazy) to make a change.
It’s understandable. Change is hard. We don’t
like to upset our vendors (especially those who pay late). Nagging them for the lowest price
creates tension. Disrupting the flow of materials can
be catastrophic. Swapping out vendors invites all sorts
of quality problems, procedural snafus and personnel
clashes.
But guess what? If we muster up just a little courage
and commitment, we could reap some serious rewards.
Just ask Mark Wuertz, vice president of finance for
40 million (sales) hotel and restaurant operator Bennett
Enterprises in Perrysburg, Ohio. “We realized
a while ago that our region was already in a recession,”
he says. “We could no longer maintain margins
by raising prices. We had to find a way to lower costs.”
Wuertz hired Cost Containment Specialists
to help him. He didn’t just examine what products
and services Bennett was buying; he also thought hard
about how the company went about buying them.
Together, the two companies analyzed historical spending.
They benchmarked what they were paying for products
and services with hundreds of vendors in Cost Containment
Specialists' database.
Next, they replaced and consolidated vendors. “We
had three divisions that were all purchasing independently,”
says Wuertz.“ A number of our vendors didn’t
realize how big we really were.”
Wuertz focused on squeezing telecommunications costs
by eliminating seldom-used equipment. And he hired an
experienced third-party natural gas broker to chip away
at his utility bill.
On the process side, Wuertz dug deep. First, he discovered
that his company wasn’t spending enough time evaluating
purchasing decisions. Certain vendors were on “automatic
pilot” because they had been doing business with
Bennett for many years. Instead, Bennett began soliciting
multiple bids and reviewing agreements periodically
to ensure the company was getting a fair shake. Cost
Containment Specialists handled the comparison shopping
that Bennett didn’t have the time to commit.
Result: Wuertz expects to save $75,000
this year, or about 1.25% of Bennett’s $6 million
in selling, general and administrative expenses annually.
Cost-cutters like Cost Containment Specialists generally
take about half the documented savings in the first
year for their troubles-but the ongoing savings are
gravy.
Those fees may be worth every penny. But if entrepreneurs
can muster the courage to improve their purchasing departments
on their own, the savings are often right there for
the taking. With inflation heating up and recession
nigh, those extra dollars couldn’t come at a better
time.
Gene Marks is owner of Marks Group, a technology consulting
firm, and author of The Streetwise Small Business Book
of Lists.
For further information, please contact:
Gary Friedman President
Telephone 937-660-5368 ext. 10
Email: GFriedman@cost-containment.com
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