Expense Reduction: Freight & Shipping Cost Management

Freight and shipping costs are expense reduction targets for most large companies and the “bull’s eye” for those involved in manufacturing, retail and distribution.

Freight cost management is a moving target that keeps operational managers asking:

• Are we leveraging our buying power or fragmenting it across departments, business units and a variety of shipping, freight and other logistics providers?
• Are we working with the right freight carriers under the right terms?
• Are we being invoiced correctly and consistently for freight and shipping services?
• Are we incurring rogue expenses outside our contracted carriers and rates?
• How do our freight and shipping costs compare to other companies?

Meanwhile, shipping and receiving staff is dealing with day-to-day concerns like damaged freight, missed pick-ups and late deliveries.

Meeting Freight and Shipping Service Expectations at Lowest Cost

When it comes to freight and shipping expense reduction, LAC Group works with clients to make sure their service level expectations are being met at the lowest cost using a variety of mechanisms:

• Basics – Identifying how and where to make adjustments by understanding what is taking the most time and where money is being spent on shipping and freight.
• Contracts – Reviewing and analyzing shipping contracts to clarify complex language, flag potential problems and identify opportunities. Guiding clients through the contract process by negotiating directly with freight carriers and other logistics providers or making sure they receive the best terms and conditions.  
• Benchmarks – Evaluating what our clients spend on freight and shipping in comparison to industry standards and other relevant benchmarks.

Reduce shipping and freight expenses saves our clients time and money, yet I think an equally important benefit they believe they gain is support. We make it our priority to care about their business. We give them peace of mind, knowing our people are educated and experienced in contract language and negotiations. We understand and apply freight and shipping benchmarks and standards that give our clients the assurance that their terms, conditions and service levels are at or above par.

Freight and shipping make up a considerable portion of the overhead expenses for many corporations; as such, they provide ample opportunity for expense reduction. And because of the dynamic nature of fuel costs and other transportation factors, even businesses that have been diligent about freight management can benefit from a fresh look, especially when coming from the objective and experienced eyes of the professionals at LAC Group.

Expense Reduction Series - Software Licensing (And it's About More than Expense Reduction)

As more business software is available under a greater variety of licensing and delivery schemes, you would think that expense reduction for software licensing would be less of an issue.  After all, greater variety generally equates to savings, thanks to greater competition.

Unfortunately, that’s not the case. If anything, the demand for software licensing expense reduction is greater than ever, along with the need to implement Software Asset Management (SAM) plans and processes.

Software License Complexity

Software licensing has never been more complex or more open to misuse and misunderstanding. (We’ll get into software license compliance in a minute.)

The right to use a particular software application may be granted under an End User License Agreement (EULA), an enterprise-wide license agreement or some variation. The purchase may be transacted through vehicles ranging from complicated volume purchase agreements to monthly subscriptions for Software-as-a-Service (SaaS), also known as cloud computing applications and services.

Add further complexity, courtesy of the IT environment:

• Business employees using some combination of desktop computers on a network, laptops, tablets and smartphones. 
• Access to enterprise software, personal productivity software and mobile applications.
• Don’t forget the access itself, with an alphabet soup of wired and wireless networks. 
• Also don’t forget organizational size and structure, along with increasing mobility and work-from-home arrangements. 

Software License Costs 

All this complexity comes at a cost.

Every application, small or large, includes a software license that must be purchased and managed. Applications come from different vendors with different purchasing agreements and terms. And increasingly, employees using a credit card can acquire software applications directly, whether it’s a web application or a mobile app from the Apple or Google store.

While software-as-a-service is touted as an affordable software solution, all those dollars and cents add up quickly when thousands or hundreds or even tens of employees are buying them, sometimes in monthly subscriptions that linger on long after a need is met.

Software License Compliance

According to Gartner, 65% percentage of clients were involved in publisher-initiated software audits in 2011, a slight increase from 61% in 2010.

Gartner recommends the implementation of Software Asset Management (SAM) programs and other processes to mitigate the risk, financial and otherwise, of non-compliance. The risk involves not only the additional software license costs, but preparation time, potential legal action and lack of negotiating power.

More Complex Software Licensing = More Pressure for Expense Reduction + Greater Need for Software Asset Management

Clearly, expense reduction is not the only software licensing concern. With the potential for costly and damaging liabilities, more businesses are coming to us for advice and protection. We give them one-stop shopping and greater peace of mind by helping them remain in software licensing compliance, negotiate the best purchasing terms, manage various agreements and minimize the complexity.

Expense Reduction Series - Office Supplies

The term “office supplies” encompasses a wide range of materials used by business owners and their employees during daily operations.  Office supplies are tax deductible expenses classified as a “Cost of Operations” on a company’s Profit & Loss Statement and annual Federal Income Tax Report.

Office supplies include: pens, pencils, highlighters, staples, paper clips, print cartridges, copy paper, envelopes, file cabinets, labels, notebooks, file folders, scissors, erasers, tape dispensers, calculators, USB drives, and more.

While the internet has drastically reduced the need for many of these items, most notably paper, office supplies remain a necessary and recurring expense for businesses.  Although online purchasing, usage contracts and discounts help to control costs, many businesses do not work within a specific budget or from a written procurement plan.  This often results in individual office supply orders adding up unexpectedly and detracting from net profits. 

Chase Cost Management (CCM), a division of LAC Group, can help your organization reduce office supply expenses and implement a customized procurement strategy tailored to your budget.  CCM has specialized in office supply expense reduction for 14 years, and has saved its clients hundreds of millions in office supply expenses during that time.  Its current client roster includes law firms, corporations and academic institutions.  What I appreciate most about the CCM offering is that they have programs that address the needs of all organizations, regardless of size.  Whether you are paying retail or have a "great deal" with your current provider, you owe it to yourself...and your bottom line...to find out if you have the best deal.

CCM also specializes in expense reduction in the following categories:  legal research, library expense audits, shipping, records, telecom, mailroom and software licensing.  Join me in the upcoming weeks as I explore each of these areas.

Expense Reduction Series - Introduction

Expense Reduction is a prominent concern for every business; this is especially so when the overall economy stagnates, as it has the past few years.  As most of your know, LAC Group bought Chase Cost Management (CCM) in late 2011.  We have spent the past 18 months completely integrating services and expanding our expense reduction capabilities.

Allow me to illustrate and introduce my next series (expense reduction consulting) with a personal story:

Each year, I engage a consultant to fight my insanely high property taxes on a piece of land I purchased almost 10 years ago.  I don't have a house on it, don't send my kids to the local schools and don't spend time there.  The attorney works on contingency and charges 40% of what he saves me from the tax assessment.

The first year we went through the process, my wife looked at the consultant's bill and asked why we were spending so much, giving up what she thought we should we be able to accomplish ourselves.  And she was right...we could do it ourselves.  The question is whether we should.  The fact is, we are not tax specialists and we don't have the time to show up at several meetings with the county.  Even if we did, would we get the same results as our consultant?  Most likely we would not.  Our consultant has specialized knowledge, gained through experience negotiating taxes on behalf of hundreds of other clients, that we could not possibly hope to duplicate.  The bottom line is  that there significant value in having a specialist do the work.

This story is analogous to a problem LAC Group runs into frequently: we often encounter decision makers who are either skeptical of expense management services, or worse...afraid of them.  A librarian for a major law firm might wrongly see these services as encroaching on his or her territory.  She thinks “shouldn't I be able to better negotiate that contract on my own?  That's my business, after all; I should be able to get the best price without using a consultant."  The fact is, however, getting great pricing on vendor contracts is not her business; her business is running a library for a major law firm.  Could she get a better price than what is currently being achieved, maybe...even probably.  But she does not have the information that will allow her to get the best price.  Just as there is value for me in using a consultant to fight my property taxes, there is value in for her in engaging an expense reduction expert.  Her business is running a library; the expense reduction expert’s business is getting her the best price.

Many companies have come to rely on procurement as their internal expense reduction experts.  Procurement, in turn, sees expense reduction consultants as a threat, when in fact the outside expert can provide them with industry-wide information and battle-tested negotiation strategies that will help make them even more successful.  As a Chief Operating Officer, I have never faulted anyone for saying to me... "we got you the best price we could last year, but this year we saved you an additional 20%."

In many cases procurement departments have relationships with their vendors (i.e., vendor reps), and are in a sense are staking successful pricing on that relationship.  In many cases they will stay with the vendor, citing some compelling reason that they say overcomes pricing that – if looked at objectively - is simply too high.

We do a benchmark study for each of our clients, as the first part of our engagement, in order to demonstrate actual savings opportunities before moving forward.  In many cases the number is so big that some procurement professionals fear that it makes them look bad.   The smart ones don't...and move forward with the process - saving tens or even hundreds of thousands of dollars in a relatively painless process.

Managing a business requires not only the production, sales, delivery and service of your specific product or service, but the management of your business itself. As many struggle to keep out of the red, focusing on what you do best and using a strategic partner to address operational expense management challenges is one of the most important and best decisions you can make as a manager.  Whether that is as the manager of a department or as a C-Level executive.

Join me for the next few weeks as we explore some of the most common operational expenses that add up quick and erode profits.