Leveraging innovation to generate margins from suppliers

Deepika Chauhan
February 26, 2020 6:00 am
Neil Burnard, CEO Expense Reduction Analysts UAE.

CFOs and department heads are constantly looking at targets, savings and budgets. Leadership is thinking about where to find the dry powder if revenue goals do not materialise or if the budget is coming up short of stakeholder expectations for 2020. The good news is, there is a common area of a business that gets overlooked amongst medium to large corporations.

This is simply maximising the best value from suppliers and developing processes for measurable cost savings. This can save over 20% of total non-core annual expenditure, leading to additional profit straight to the bottom line.

Uncovering cash flow within your organisation can yield many important benefits and enable your business to stay ahead of the competition, allowing you to reinvest in strategic growth. Whether you are looking to reinvest in staff, technology, marketing or new products and services, the extra dirhams you save today can help you achieve your goals for 2020 and beyond.

Businesses can focus on general, non-strategic costs such as telecommunications, energy, logistics, printing, utilities, office supplies, freight, courier and marketing expenses. These are expenses that are not the focus of professional pricing negotiations.

All savings that are realised, can be improved over time by assessing and then monitoring supplier performance in accordance with the supply contract.

Here’s our top recommendations for how to uncover your own hidden cost savings:

Inquire about new industry innovations: latest solutions and services tend to offer better value for time and money as well as enabling you to stay ahead of the competition.

Negotiate with suppliers more effectively: you know your order history so use this to optimise pricing and delivery processes.

Avoid unaccounted for supplier inflation prices: clients often miss price increases that have been implemented. For this reason, some suppliers can get away with unfavorable fees and terms. Have your finance or legal team review your contracts.

Streamline supplier contracts: continuously confirm you are leveraging the software or service solutions you are paying for. Contact your provider to cancel any under utilised solutions.

Monitor and maintain savings over time: You have to stay on it, set up at least a six-monthly review of existing agreements.

Ask about supplier rebates: Many organisations are unaware of the financial rebates available to them. The type of supplier determines the type of rebate. Make the most of your entitlement to reduce next year’s spend.

Staff in charge of procurement or purchasing have many responsibilities, as a result, core expenditures remain the focus. Rarely do they have the time, manpower or expertise to analyse the non-core expenses associated with the day-to-day operation of their business.

Despite the rush to the finish line for 2019, organisations should adequately prepare for what is ahead in 2020. Asking the right questions, analysing data correctly and allowing ample implementation periods is critical to prolonged success.

Key takeaways

  • Despite the rush to the finish line for 2019, organisations should prepare for what is ahead in 2020.
  • Many organisations are unaware of the financial rebates available to them.
  • Continuously confirm you are leveraging the software solutions you are paying for.

By Neil Burnard, CEO, Expense Reduction Analysts UAE.

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