IS IT JUST SUPPLIES OR AN OPPORTUNITY TO STREAMLINE AND HELP THE BOTTOM LINE?

January 1, 2010 | By admin In Supply chain |

IS IT JUST SUPPLIES

AN OPPORTUNITY TO STREAMLINE

AND HELP THE BOTTOM LINE?

Having managed accounts of many sizes, ranging from the organization that spends $2,000 per year to the one that spends upwards of $7 million in office supplies for one of the top office suppliers in the country, I have seen it time and time again. Dollars are pouring out of your organization’s bottom line unnecessarily. Often times management is so preoccupied with the day-to-day operations and increased responsibilities that they overlook an easy way to cut some additional costs. Office Supplies is an area that is often overlooked in the decision-making. For example, where to procure the organization’s supplies is left to an administrative person who may or may not be receiving the best pricing – worse yet, they may be comparing prices on the retail websites of Office Depot, Staples, Office Max and other suppliers thinking they are saving the company money by doing so. Nothing could be further from the truth.

While many companies do have a business to business (B2B) account with one of the top suppliers, many small and medium businesses continue to purchase supplies at retail prices. The industry is very competitive and there is a benefit to having a B2B account. By now, your company should have received at least one phone call or personal visit from a business development manager of one of the big three office suppliers. How many times have you (or someone in your organization) said that you are happy with your current supplier in the hopes that the sales person on the other side of the telephone will just go away? Consider this: spending one hour with that person could result in the savings of many hours and dollars in the future.

Lets discuss a few ways in which sometimes these purchases are made, which result in higher expenditures than initially thought. First, someone in management decides they need to procure a particular product and asks his or her administrative assistant or secretary to find it. He or she may or may not be specific so the admin just “Googles” the product and pulls up the first one that comes up. Or, perhaps he or she might just go on line and compare prices for the top three links. They may do this each time they have a need for a product. A second approach may be that in an office with 100 people, there may be 10 administrative personnel all using different vendors to procure the supplies. Each may think they are receiving the best value while shopping around on the Internet. Lets consider the costs associated with these approaches:

In each instance, the staffer may spend a few hours per week just researching product and “finding the best price.” What is not often taken into account is the time spent in research. Consider this, the salary for an entry level administrative assistance is between about $34k and $43k making the average of these about $18.61 per hour in the Fairfax, VA area*. So, the admin, who just spent one hour trying to save you $5.00 on a blue widget, just cost you $18.61 (multiply this by x number of admins and x number of times each of them surfs the Web to find a better price on a blue widget – and perhaps getting sidetracked to social networking sites for a “quick visit”). The costs of this practice don’t stop there, however. There is the price of the various invoices that now need to be processed by your accounting department or person. Let’s figure your organization receives x number of invoices per month, including multiple invoices for office supplies, technology, coffee, copy and print jobs and other categories. How much time does it take an accounting person to key in the invoice into the system, wait for it to be verified, then wait for approval from another person? Once approved, a check request needs to be done and then the line item may come up at the end of the month in account reconciliation. Consider the time of an accounting clerk who earns between about $30k and $37k per year in Fairfax, VA* or about $16 per hour. An added hour for a product where a person thought he or she was saving getting the best price is not adding up. What is the solution?

The solution is to find a vendor that can meet most of your needs in a particular line of business. For example, an office supplier should also be able to provide your organization with coffee, break room supplies, copy and print services, technology items, furniture, cleaning and break room supplies. By consolidating the spend for all of these categories, you will have more purchasing power with a single vendor, who may now be willing to offer you better pricing up front. Contact your office supplier; provide it with a usage report for all of the items you’ve bought in the past year (or quarter or month), and let them do the legwork for you. Then, implement a system that is followed by all purchasers making the procurement process uniform and consistent – preferably with one vendor, where possible. The change needs to be enforced from the top down in order to prevent rogue spend or time wasted by employees “saving” the organization money with the effect mentioned above. Enforcement can be done electronically via an approval process where the manager or designee can approve, modify or reject the orders for that group with the click of a mouse.

Consolidating vendors and implementing a system with a “sole provider” will help your organization’s bottom line in the long run. Why pay retail when you can have a pricing schedule based on the items your organization procures? While you may spend a couple of hours of your time upfront doing this, it will result in savings as it greatly reduces the soft costs associated with having multiple vendors, as well as your spend given that you should be able to negotiate better terms with a business account. Even if you have a business account, it will not hurt you to invite the representative of your main supplier to do a business review of your account and guide you in ways to improve efficiencies in their respective lines of business.

* www.salary.com

Francisco Jaramillo has over 20 years of working experience. After his Honorable Discharge from the US Air Force in 1995.
In 2002, Francisco begun his retail career in the corporate Headquarters of a fortune 200 office supplies company, then located in Del Ray Beach, FL – as the company’s sole litigation and compliance paralegal. Once he received his MBA from the University of Miami in 2004, he opted for the business side and relocated his family to Northern Virginia to join the company’s Business Solutions Division as an Account Manager, where he has been promoted several times.

Francisco has been a speaker in several events and was invited by the US Hispanic Chamber of Commerce to judge their Business Plan Competition.

In his personal life, Francisco enjoys playing golf with his wife and daughter, reading and traveling.

Contact information:

franjaja@gmail.com

561-212-2919

Article Source:http://www.articlesbase.com/small-business-articles/is-it-just-supplies-or-an-opportunity-to-streamline-and-help-the-bottom-line-1650319.html

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