Since it’s impossible to get away from cost reduction, inspired by a recent SIG article on Strategic Cost Management: The Survivor’s Playbook to Savings, which listed the following high-impact projects for same year savings:
- Software Maintenance-Rate Reduction
Identify all of the maintenance contracts, annual spend, and maintenance percentages. Develop a standard maintenance agreement and standard percentage for annual maintenance, require an exception appoval process with senior management involvement for any alterations, and focus (re)negotiations on highest savings opportunities. Savings of 5%+ is not uncommon.
- Software Maintenance-Elimination
Eliminate maintenance on all non-critical systems or all systems where annual maintenance cost is low. (In the latter case, even if the system is critical, it will cost less to re-instate the maintenance on a system at a later time if it is required than to pay maintenance on all such systems.)
- Legal Services-Hourly Rate Reduction
Most legal firms raise costs annually regardless of competitive market conditions. (Threaten to) conduct a sourcing exercise and watch rates drop quickly.
- Legal Services-Bundles and AFAs (Alternate Fee Arrangements)
For general legal services that are project or task oriented, and not litigation oriented, bundles or AFAs can save the company a significant amount of money.
- Desktop Printers-Elimination
Shared multi-function devices, with password printing, are much cheaper to operate than individual desktop printers.
here are a few more quick-hit cost savings projects that will generate cost savings if the organization has not run them (recently):
Unbundle print from creative services and then run a quick sourcing project. Significant cost reductions in the 10% to 20% range (or more) will quickly materialize when printers are being faced off against each other.
- Office Supplies-Live SKU Guarantees & Price Checks
Everyone knows that a quick auction will drop prices across the board, but most category experts also know that the vendors make this back by raising prices a few months down the road when they think no one is looking and by bidding expiring SKUs, which will be substituted with higher price items down the road. Insisting on a clause that states that all SKUs must not be schduled to reach end of life within the contract term, and that any SKU that is retired must be replaced with a SKU of equivalent, or greater, functionality at current, or reduced, cost will prevent those overpayments and insure that significantly greater savings materialize.
- Computers-Overpayment Recovery
Most vendors don’t honor the “best price” clause and generally charge the same rate for the life of the contract, even though most computers and components decrease 2% to 3% a month. A careful spend audit will typically reveal 10% or more in overpayments that can be targetted quickly.