Operations Q&A: What's the Harm in Looking for Savings? - Modern Distribution Management

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Operations Q&A: What’s the Harm in Looking for Savings?

Fear and ego aren't good reasons to avoid evaluating your operations.

Question: What’s the harm in looking for savings?

Answer: I have been on both sides of the desk – sitting in the corporate seat and, more recently, as a consultant/trusted advisor. During my years in the corporate world, I found myself responsible for negotiating with our vendors. UPS. FedEx. LTL carriers. There were the carton suppliers and phone carriers.

I truly thought I was getting the best deals possible for my company. But knowing what I know now, I know that was not the case. Unless I worked for one of the 800-pound corporate gorillas – which I did not – the companies I worked for would never be afforded the very best rates, no matter what I thought or what the vendor rep represented.

But I sure thought otherwise. That is, until I began sitting on the “this” side of the desk, helping my clients become more profitable.

Bottom Line: Today, there are firms with the sole purpose to help companies identify and/or secure better pricing from their vendors than they would independently. These firms are staffed by former industry professionals. For instance, those that focus on freight employ former UPS and FedEx people. Who better to know the ins and outs of the freight world and the nuances of freight contracts?

The sales model of these firms seems foolproof and are of great value to companies looking to reduce their operating costs. They study current activity through an evaluation of actual invoices – for free – and then determine if real savings are achievable. Some examples of these savings: negotiating sharper contracts with existing carriers, identifying lower cost carriers and aggregating volume so that the sum is greater than the parts.

If savings can be achieved, their fees are taken out of the realized savings. No out-of-pocket expense to the company.

What is the harm in going through such an evaluation? Isn't this a no-brainer decision? Well, to my surprise, there is plenty of resistance. To change. From insecurity. From fear of potential job loss if senior management discovers there are better deals to be had. From ego.

From my perspective, there truly are two outcomes. It is a win-win situation. Your company goes through a thorough evaluation and either saves money as a result or you receive an “A” on your report card because you’ve negotiated the best deal possible.

If you would like some names of such resources, send me a requestto lee@schwartzpro.com.

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