Are there opportunities to optimise your business costs? Have you exhausted these before considering taking any tough decisions on staffing?
The scale of the pandemic combined with the pace of developments has been staggering. Directors have urgently had to assess their cash flow, address solvency and take serious decisions on staff and their business longevity - but how many have taken the chance to leverage their supplier relationships to optimise costs?
In an uncertain world, certainty is likely to be of high commercial value
Now could be a good opportunity to review contracts for critical spend areas. Are you able to offer longer term commitment to your suppliers currently? Events are likely to have impacted business plans or projects by year or so, so can you extend current contracts by a year too? What value might that offer your suppliers?
For example, businesses are likely to have critical software applications. The software licensing arrangements underpinning these could be reviewed and commercial conversations could be entered into with software vendors or their resellers. There may be an opportunity to extend licence provisions at an optimised cost profile, potentially reducing costs whilst securing your business and supporting your supplier.
This principle could apply across many spend areas. Other examples include telecoms and network connectivity which are more in focus than ever as the world’s workforce adjusts to working from home. Contracts across your IT estate could be reviewed to ensure your business has the right service levels, monitoring, proactive support as well as Quality of Service in place and discussing this whilst also taking a view as to the length of commitment your business can offer to your suppliers at this time might unlock improved or predictable costs.
Relationships really matter
Never more so when times are tough. I’ve purposefully avoided the term ‘cost reduction’ as whilst the reduction of costs is clearly an attractive and likely outcome, balance has to be struck between ensuring your business has the service it needs right now, from suppliers that remain viable and ‘in business’ to support you in future. Cost optimisation is as much about protecting your suppliers as it is about reducing costs and common sense must be applied. Open, honest and direct conversations between directors of a business or their agents, and the senior counterparts of your critical suppliers is likely to result in positive outcomes for both parties.
Large businesses are typically fortunate to have in-house procurement resource which is no doubt working tirelessly to ensure contracts are in place, that critical suppliers are identified and contacted and that supply chain impacts are understood and mitigated as much as they can be. Smaller and Medium sized businesses on the other hand usually have less access to procurement resource whilst also have relatively more urgent need to secure their financial position. Whether large or small, act to optimise your business costs, and ask for help and advice if you need to.
Chris Cliffe FCIPS
Director | CJC Procurement Ltd
www.cjcprocurement.co.uk email@example.com @CJCliffe_FCIPS
Optimising business costs and protecting your suppliers is critically important