Top Cost Categories for Savings

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You might be surprised to learn which areas of indirect costs and overhead expenses yield the greatest percentage of savings. While, naturally, the type of business you are in determines the dollar savings you might achieve in specific categories, many of us pay far too much for the day-to-day items almost all companies use.

So, where should you look for ‘easy wins’ when planning your cost reduction initiative? And how should you go about achieving your goals?

ERA Canada achieves substantial savings for its clients across all cost areas. Here are just a few specific examples of average category savings:

• Copiers and printers: 42%
• Document storage and disposal: 26%
• Office consumables and paper: 20% each
• Off-site printing: 20%
• Cleaning and janitorial services: 19%
• Insurance: 28%
• Telecommunications: 21%
• Couriers and freight: 19% each
• Uniforms: 34%
• Waste management: 24%

Typically, people believe that there is not much room for negotiation on prices and few differences between suppliers’ services in these common cost areas. Not true. Consider a few methods for revealing savings opportunities:

• Say “No” to price increases. When a supplier tells you its price list has changed, don’t take it lying down.
• Track down the prevailing market prices before you start price negotiations (don’t rely on suppliers for this information).
• You may believe your costs are under control based on historical trends, but what are your competitors paying? Benchmarking data is a useful tool to highlight areas that have the most potential for improvement and will help you to set priorities. Gather the data from outside agencies, consultants, or benchmarking services. Be careful to ensure that you understand the data as they apply to your situation and use them to negotiate with your suppliers from a position of strength.
• Determine your product and service requirements. Is there a better way to procure the goods and services you need? Look at total costs, including item price, the cost of holding inventory and administration costs. Don’t accept premium services unless you really need them: for example, 9 a.m. next day courier delivery service if 5 p.m. is acceptable.
• Find out if there are any new technologies or suppliers that can immediately reduce your costs and administrative time. Work with your suppliers and external experts to identify new cost-cutting strategies.