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Visibility and Cost Management

Presentation on Vendor Cost Management and the importance of visibility in to costs.

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Berlin Pacific
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121 views

Visibility and Cost Management

Presentation on Vendor Cost Management and the importance of visibility in to costs.

Uploaded by

Berlin Pacific
Copyright
© Attribution Non-Commercial (BY-NC)
Available Formats
Download as PPT, PDF, TXT or read online on Scribd
You are on page 1/ 16

All material © copyright 2009 Berlin Pacific, all rights reserved

The Hidden Potential in Your Services Spend


Visibility is the Key
1. Current and relevant “Information” is often a constraint
when trying to reduce vendor spending without sacrificing
service
2. A lack of visibility, defined as poor, missing, or vague
information, often keeps this constraint in place
a) No one is aware of a better solution
b) We are unwilling to risk service disruptions to try something new.
c) We are unwilling or unable to tackle a complicated issue that few
in the organization have expertise in

www.berlinpacific.com
Why is Nothing Done
 Gaining visibility is time intensive. To track complex services
purchased you can have dozens of data points for every service,
and even 60 person offices can have 100 to 200 services in a
complex category.
 Once you have visibility, fixing issues can also be time intensive,
some category vendors are notorious for not fixing billing issues
and not applying new contracts. All issues must be tracked over
several months until resolution.
 Typically anyone high level enough to realize this is a problem
and how to solve it is too busy to be distracted. Their present
approach catches many problems and is all they have time for.

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Some signs of low visibility
1. Does your company have processes and the
time to actively manage ALL vendor costs?
2. Billing Errors - Are your people frustrated with confusing
bills, overcharges, and time wasted dealing with vendors?
3. Unused Goods and Services - Do they not know
EXACTLY what you’re paying for and if you need all of it?
Is detail vague?
4. Above Market Pricing - Do you know if you’re getting the
best rates available? Is it hard to find out?
5. Is further time spent just not worth the hassle? Does it
seem like a black hole?
6. Can the contradiction between “waste of time” and
“waste of money” be solved?

www.berlinpacific.com
Telecom as a sample category
 Every business uses it, and lots of it.
 Every business is too busy running a
business to aggressively manage telecom
costs
 Telecom can cost $1,000 per year per
employee, it is a top expense.
 The longer nothing is done the more
expensive it becomes.
 Visibility is so low, and expenses are so
high, that 50% cuts in costs are routine
with the right process.
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Visibility and Telecom
 Telecom companies do not provide their clients the free information
needed to make informed buying decisions.
 Most organizations cannot answer the most basic questions –
 What are we paying for?
 Do our inventories match up with our invoices?
 Are we paying too much?
 Can we negotiate better contracts?
 Can we move to less expensive carriers?
 Where are all of our telecom services?
 Are we paying for unused lines and services?
 Are there newer more cost effective technologies?
 Are we over capacity?
 Most companies simply do not have the in-house expertise to provide
the information and make an informed buying decision.

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The Process to Cut Telecom Costs
 Vendor bills and records are used to create a detailed consistent inventory
of every single service (phone number or line) and the cost of the service.
 The inventory creates visibility in to details. It allows one to see all costs in one
place, and compare across bills. Bills and accounting alone don’t do this.
 Then each of the services is analyzed and three questions are asked of each
service.
 What is the business need, is it unused or underused?
 Is the charge the one contractually agreed to?
 Is the service over priced in today’s market?
 Then unused services are discovered and terminated and underutilized
services are consolidated.
 Vendor’s billing errors are discovered and fixed.
 Better rates can be negotiated and implemented.

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Gaining Visibility with Telecom Expenses

 Without the inventory you don’t have visibility. Without visibility in to


what you’re buying, the business need, and what it costs, you can’t
manage it.
 The nature of the inventory reflects the nature of the goods and
services being purchased.
 Inventories for telecom help determine if there’s a disconnect
between the contractual and current market price of the key
services the business needs and the actual bill.
 Without visibility companies MUST have a disconnect between the
optimal price of the services that I.T. wants and the total $ amount
accounts payable is actually paying.
 Year after year we find most companies pay 100% more than they
need to due to visibility issues.

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Two Solutions
 Delegation
 Outsourcing
 Basically these are two sides of the same coin.
 The primary constraint is Decision Makers’ Time.
Decision makers should prioritize decision making.
 If cutting a cost no longer takes up a lot of a
decision makers time, it can move rapidly up the
priority list.

www.berlinpacific.com
Delegation
 Get an IT person (who understands why telecom is purchased) and someone in
accounts payable to create an inventory in their spare time. Make sure they account for
every service being purchased and why it is needed and if it is being billed correctly.
 Have them fix any billing errors.
 Have them submit to the decision maker any unused or underutilized services. The
decision maker approves, the lower level staff executes.
 The staff should figure out how to easily determine if a quote is worth pursuing, then
be open to new quotes or give targets / demands to potential vendors. If a deal is found
the decision maker will be given a clear presentation as to why it is a deal.
 The staff will determine what the cost of needed services should be based on the
existing contract or any new ones. This will be used to document if a bill should be
flagged for review. Everyone will know what each month’s bill should look like
when -
 Old billing errors are fixed.
 There are no unused services
 New pricing is implemented.
 Each month’s bill will be easily checked to make sure it is the expected amount.

www.berlinpacific.com
Outsourcing
 Have a motivated outside expert in the field suggest
actions for cost cutting.
 Make sure they can give you full visibility in to what you
are purchasing and should be purchasing. Without this
they won’t be very effective. Similarly, if you have visibility,
you can give the expert the visibility to make good
suggestions, saving their expensive time.
 Approve the suggestions you like.
 Have them implement the suggestions you approve.
 Make sure they provide documentation.

www.berlinpacific.com
Results for Sample Client A:
 Reviewed $45,000 Monthly Spend for NY
Company with 550 Nationwide Employees
 Implemented ~$25,000 a Month in Savings
 ~$300,000 annual savings
 ~55% Monthly Spend Reduction
 Found and terminated many unused lines and
services, and obtained lower rates and vendor
credits

www.berlinpacific.com
Results for Sample Client B:
 Reviewed $15,000 Monthly Spend for Nationwide
company
 Found ~$9,600 a Month in Savings
 ~$115,000 annual savings
 ~63% Monthly Spend Reduction
 Renegotiated contract and eliminated very
expensive unused lines and services

www.berlinpacific.com
It’s not just Telecom
 Insurance (including health)
 Freight
 Tax
 IT Recurring Maintenance Charges
 Print and Financial Print
 Credit Card / Payment Processing

www.berlinpacific.com
www.berlinpacific.com
[email protected]
212.247.2502
www.berlinpacific.com

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