Selecting a benchmarking cost reduction consultant with which to create an
alliance can be difficult.
The offer is attractive:
Engage their exclusive services and they will do all the work and you save
money. Fact or fiction? I am asked this question frequently
enough that it deserves a general answer here.
Benchmarking for best
practices is a different topic covered here.
We do
none of this type of cost reduction in our practice and will, when
appropriate, recommend specialist services to clients. This article
discusses what the consultants provide, how they make a profit, how you save
money, the impacts on your company, the pro's and con's, and a question
check list to use in selecting a consultant.
There
are hundreds of so-called cost reduction experts just in the US. How
can you select the right one for your company when they all tout savings of
10% to 50%?
Here are
some key points to consider before engaging their services:
What
services do these consultants provide?
The
typical consultant will arrive with a data-base of typical costs of supplies
and materials for companies of your type. A quick look at your
invoices will give them a chance to start quoting you some savings figures.
Some will conduct a retrospective audit and recover overcharges, others will
work on future purchases, and some will do both. They will often look
at such expense categories as:
 | Raw Materials and Components |
| Office Products and Equipment |
| Perishable Tooling |
| Janitorial Supplies and Services |
| MRO (Fasteners, Bearings, Electrical, Motors, other industrial)
|
| Waste Disposal and Other Contract Services |
| Coffee and Beverage Services |
| Uniform purchase and rental
|
| Payroll Services |
| Telephone Systems and Services |
| Express Shipping, Mail and
Postage |
| Utilities |
| Industrial Gases and Welding Supplies |
| Temporary Staffing Services |
| Wireless Communications - cell
phones |
| Computer Equipment and Supplies |
| Printing, Forms, Advertising, and Marketing/Promotional Materials
|
| Other Operating Expenses |
| Copy Costs including Supplies and Equipment
|
If you
sign a contract with them, they will audit the agreed expense categories,
find alternative lower cost suppliers and present these suppliers to you
with a clear calculation of the annual cost reduction if you purchase from
them.
The net
result to you is a set of new suppliers, some renegotiated supply
agreements, and reduced costs. Simple. No results, no savings;
no fees on your part.
Continued
