Total Cost of Purchase Management vs Cost Cutting

What’s the difference and how to choose?

Options

• Status quo• Internal• External

Status quo

• Not a viable option• “Beware of small expenses: a small leak will sink a

great ship.” Benjamin Franklin

Status quo

• Example – rolling electricity contracts• Example – security guard’s £8,000 ‘bonus’• Communications spend trebled in last 20 years

Internal resources

• Who – are they qualified to do it?• What is the cost of this internal resource? • What else could they be doing?• Will it just come down to price/salesmanship?• What resources are available to them?*

External consultancy

• What questions should you ask?– Are they independent?– Management or tariff swapping? – Implementation or just recommendation?– Continual monitoring? – Price or usage? For example…

How are they paid?

• Commission• Upfront fees• Contingency fees

– Projected savings– Actual savings

Will they…?

• Conduct a thorough audit

• Look for and rectify historical billing errors

• Profile your expenditure

• Find best value for your specific needs and requirements

• Manage implementation

• Provide ongoing monitoring and ‘troubleshooting’

• Be a trusted advisor

In other words…

…will they manage your costs or just cut them?