Era Profit News Nov 2011


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Expense Reduction Analysts November 2011 Newsletter. Articles on Logistics, Cloud Computing, Courier Costs, Broadcast Music Costs amongst others.

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Era Profit News Nov 2011

  1. 1. PROFIT NEWS INSIDE THIS ISSUE Supply chain robustness Communications at Risk? Logistics Expert Ken Rogers unveils what to expect in 2012 Brian Holmes highlights how best to manage your communications risk in 2012 In the cloud Michael Hully and Chris Brown consider the benefits and risks of implementing a cloud based IT system “Expense Reduction Analysts has helped to save the company hundreds of thousands of pounds, and they’ve also become a trusted partner, providing advice on a range of process, compliance and general business issues” Jason Ashby, Managing Director, UK Flooring DirectEXPENSE REDUCTION ANALYSTS SUCCESS STORYWall-to-wall savings forUK Flooring DirectU K Flooring Direct (UKFD) was “We agreed a programme of work with when they take delivery of their product. Jason Adderley describes “By utilising the up an extra 1-2 hours a day for the Samples named as the fastest growing firm Jason Ashby, and began by looking at The choice of delivery agent is crucial, as experience of supplier, pallet network and Manager. Mike also indentified a 16% in the West Midlands (Sunday either end of the company’s logistics Jason Adderley explains “Timber flooring client we were able to produce a design postage tariff saving and a 50% reduction inTimes Fast Track 100 December ’10), and services, drawing in the expert services of is unlike most products typically bought that should result in less damage in transit. the cost of the associated stationery.the 4th fastest growing retailer in the UK. Kevin Fryer from our Logistics Team.” online. The average order weighs 500kg, At the same time we brought the cost of has a retail value in excess of £600 and is pallets down by a quarter.” “Expense Reduction Analysts puts us onAlthough a relatively new company, UKFD’s Greater visibility & control in logistics delivered on a pallet.” a far better footing from which to achievefounders have over 25 years of experience Alongside the freight projects Expense our expansion goals”in the flooring trade. The business has taken Kevin recommended a fundamental UKFD had outgrown their existing local Reduction Analysts dealt with some of theadvantage of the opportunities presented by change in UKFD’s terms with overseas supplier and Kevin Fryer was tasked with other common costs borne by online retailers. Jason Adderley of Expense Reductionthe internet age to offer an online service suppliers, to take control of inbound finding a suitable haulier. The key criteria Steve Whitlam assessed Merchant Card Fees, Analysts summarises the relationship sothat cuts overheads and offers customers a ocean freight and place the business in the for a new supplier would be network a major consideration for UKFD as virtually far: “It’s rare to get the opportunity to workhuge range of high quality timber flooring hands of a specialist agent. The resulting coverage and rigorous quality control all customer transactions occur online or over with such a dynamic company. There’s noat low prices. increase in control and visibility has from warehouse to final destination. the phone. Steve quickly realised that UKFD doubt that UKFD is exceptionally good enabled the company to plan shipments were not enjoying the rates that they could at sourcing and selling their products.Jason Adderley of Expense Reduction and promotions more effectively than Armed with tender returns offering have been, and took some simple procedural Working in the background, we’ve helpedAnalysts takes up the story of the before. UKFD is also saving 28% for each savings between 5-40% Kevin eventually steps to regularise the position before going to put processes and suppliers in place thatpartnership between the two companies: and every container landed in the UK. focused on direct options with pallet out to a full market tender. should see UKFD enjoy a much greater“UK Flooring Direct is a very dynamic networks’ central hubs. Kevin explains proportion of the proceeds of their growth.”company. The challenges posed by triple- As UKFD supplies directly to domestic “UKFD were able to contract centrally Jason Ashby was pleased with this quickdigit growth are legion – not least the need addresses, the only physical contact most with a pallet network that was willing to win “We’d overlooked our merchant card Jason Ashby of UK Flooring Direct addsto continually bear down on the cost base. customers have with the Company is become a key partner in their business. The fees for a while, and were staggered his view: “Expense Reduction Analysts supplier’s helicopter view of product from by the savings that Steve managed to has provided a dual benefit to UKFD; dispatch to arrival minimises damages achieve with some simple changes to they’ve delivered savings which make a and handling errors. The supplier has also our transaction processing, let alone the huge difference to our bottom line, whilst Table of Savings made further suggestions for improved further savings achieved when he went out at the same time improving our processes efficiencies in pallet stacking and loading. to tender. With the growth in the volume and controls. We’re on a far better footing UKFD will benefit from six-figure annual of transactions we’re experiencing in 2011 from which to achieve our expansion Category Saving(%) savings too.” paying a competitive market rate for our goals and I‘m already talking to them card fees is imperative.” about other ways in which they can help Inbound ocean freight 28% Once the outbound freight project had us do that.” UK outbound pallet freight 16% been implemented, Jason Adderley Steve Whitlam is currently engaged to brought in Simon Phippen to analyse identify a consumer credit partner. Merchant card fees 37% UKFD’s use of pallets with Ruban Field Samples postage 16% – UKFD, Operations Director – and the Mike Stevenson, Expense Reduction pallet network. Working with a pallet Analyst’s Fulfillment expert spotted an Samples stationery 50% manufacturer to redesign the pallet, and opportunity in UKFD’s samples despatch Pallets 24% taking account of the specific load it operation. With over 300 samples sent carries, the dimensions were altered to out each day, the implementation of a allow a greater degree of tolerance during more efficient process was overdue. By Total Annual Savings: In excess of £250,000 mechanical handling so that the product close observation, Mike suggested some would suffer fewer damages in transit. procedural and procurement changes freeing
  2. 2. EXPERT NEWS - CHRIS BROWN & MICHAEL HULLYIs your head in the cloud?I t is not unusual to hear entire Expense Reduction Analysts IT Solutions • What due diligence have you The above list is by no means meant to be departments within an organisation and Services can help you specify new undertaken on the cloud supplier? Will exhaustive, and is only an extract of the type extolling the virtues of cloud computing IT solution requirements; engage with they still be there tomorrow? What of questions Expense Reduction Analystswhich is the general term for anything that potential suppliers; objectively evaluate would happen to your data and service IT Solutions & Services would considerinvolves delivering hosted services online. products & service offerings and negotiate if your supplier disappears? when recommending a suitable solution. sound supply and service contracts. In thisA cloud based service has three distinct way you get the solution that meets your • How is your demand for using thecharacteristics that differentiate it from current and future needs, not what the cloud services provided by thetraditional hosting. It is sold on demand; salesman is trying to sell you vendor? Is it mostly constant or widelya user can have as much or as little of a varying? Cloud services can be mostservice as they want at any given time; and If you do decide to go down the cloud cost effective for varying demandsthe service is fully managed by the provider computing route here are some key than for constant demand.(the consumer needs nothing but a personal considerations:computer and Internet access). • What is the frequency of usage? • What are the total costs for the entire Very frequent usage may make lessWhile there can be benefits in adopting solution? economic sense in a cloud basedservices offered by a cloud service provider, ‘Pay as you Go’ model.the applicability of these services will • Are you looking for a bespoke system,depend on the business needs and profile or could you use a system ‘out ofof the enterprise. Not all services will be the box’? Cloud based services areapplicable for all organisations. typically expensive to customise.For example, an organisation with multiple • Where is your data being held? Doessites, employees working from home and/or the supplier give you any guaranteesa sales team who are on the road may get about its safety?greater benefit than an organisation withoutthese facets within it. • What would happen if the system went down because of technical issuesIt is therefore imperative that before experienced by the supplier? Coulddeciding on the technology that will you survive without it?deliver a comprehensive IT solution adetailed requirements specification of • How long would you use the systembusiness needs is first put together. Decide for? Vendor lock-in is one of thewhat the organisation requires to meet its major issues in cloud based services.aims and objectives before deciding how it Changing suppliers within a cloudwill be delivered. environment may be more challenging than migrating with on-premise software. EXPERT NEWS – KEN ROGERSLogistics: Mastering the supply chainF or over 200 years, the term ‘supply What does this mean for UK Business? • How well equipped is your supply chain chain’ has adequately reflected the to cope with adverse weather conditions, nature and resilience of a linear In effect, as the marketplace has evolved, such as excess snow and flooding?process, from raw material to finished there has become an increasing concern What would be the contingency if an areaproduct. However, the supply chain to measure the robustness of the supply was hit by adverse weather conditions?process has evolved and is now a network chain; if left unchecked this can present Would they be able to source from anof interconnected (non-linear) systems. a significant risk to your organisation. alternative supplier without disruption? Examples of this are the IcelandicThese changes mean: volcano in 2010 effectively shutting down • Who will you contact in the event Europe for two weeks, and the Japanese of a supply chain failure? How will you• Production to delivery are now de- earthquake which resulted in major address issues? What are your emergency centralised and reliant on ‘just in manufacturers being closed, the effects of plans should something happen? time’ principles rather than ‘just which are still being felt. in case’ Areas for concern:• Relationships have become transactional and have eroded the • Supplier economic sustainability – how levels of trust previously experienced. financially secure are your suppliers? Have their payment terms changed recently?• The supply chain can now be Have you checked out their credit score? on a local, regional, national or international scale, without the need • What serious disruption plans do you for the organisation to invest in large have in place? What would be the cost of production facilities. disruption within your organisation?
  3. 3. EXPERT NEWS – HARTLEY JENKINSON & SUE CARBINHitting the right note; are you aware ofyour broadcast music costs?B usinesses that broadcast music anywhere on their premises face the cost of A recent review by an Expense Reduction CONTENT: Content ranges from simple Questions for uncovering savings broadcasting the music itself and also the associated license costs from Phonographic Analysts expert presented one retail client music through sophisticated bespoke Performance Limited (PPL) and the Performing Right Society (PRS). with significant savings on their broadcast music profiles into video and promotional 1. Do you know what qualifies as a music costs. Further savings are also possible visual content. This is obviously service ‘public area’ in music licensing through lower licensing costs should they driven, and can be a commercially terms? elect to review the music content. sensitive decision for a business. The copyright status of the music chosen 2. Do you know how much your This market is dominated by four content will have implications for marketing organisation spends on music and suppliers who control 80% of the market communications and licensing costs. licenses per annum? between them. Most contracts contain restrictions which mitigate against clients LICENSING: Music license costs can 3. Are you satisfied that you are paying being able to uncover their available account for approximately 45% of total cost the correct license fee? savings. Automatic rollover of contracts in this area, so they are the key cost driver with anti-competitive notice periods is and often viewed as a necessary evil. 4. Do you know what equipment you common practice. own and what is rented? Performing Right Society (PRS) collects TECHNOLOGY: Recent developments royalties on behalf of the copyright holder, 5. How much does your business spend in technology now allow lower cost and which is usually the writer of the music. on service calls and maintenance? lower maintenance options for delivery Phonographic Performance Limited (PPL) platforms. However, most supplier collects royalties for artists and performers. contracts are over a number of years They both apply complex tariff structures (three plus), therefore the suppliers have that vary by venue type. little incentive to migrate clients to lower cost hardware solutions. Speakers and Broadcast music and licensing is a associated electrical items tend to be, but complex area of expense in which are not always, installed and owned by Expense Reduction Analysts are keen to the user. The scope of a project will be assist you. affected by this.EXPERT NEWS - BRIAN HOLMESRisk Management for 2012I n early October 2011, many The Communication’s Team at Expense Blackberry customers experienced Reduction Analysts have experience in service interruptions and delays for managing risk management issues, and areup to 3 days in some areas. The affected happy to discuss any concerns you may have.regions included Europe, the Middle East,India, Africa, Latin America, Canada, and What to look out for in 2012:the United States. As of Thursday, October13, service levels returned to normal. Within the communications’ sector, there is still scope for reducing the costs thatThis highlighted the need to consider risk are being charged to organisations asmanagement within communications, the amount of providers has increased,and what would an organisation be able all offering different tariffs and serviceto survive, should anything go wrong. levels. How much are you spending onHowever, there is a very clear cost element communications? How much would a 19%when implementing comprehensive backup saving represent to your organisation?provisions and as Blackberry experienced,do you need a back up for your back up? One area of concern for organisations is the volume of calls being made whenWhilst mobile communications are one compared between mobile phones andarea of the risk management programme, landlines. Historically, there used to be aincreased use of the internet within 50/50 split between landlines and mobileorganisations may be of more concern. calls, but more recently there has been aWhat would happen if you couldn’t pay significant rise in mobile usage, with ayour staff’s wages online? What if you were ratio of 80/20 being more common. Is yourunable to pay an invoice in time? Would organisation on the right tariffs? Are youryour credit rating be affected or would the employees using their mobile phones out ofsupplier stop supply? work hours?
  4. 4. EXPERT NEWS – ANDREW PEGGIs thinking smart, costing you more? I n recent years, there has been a how to manage, and this can then become substantial increase in employees a significant drain on resources, which regularly working away from their many feel is completely unmanageable”, main place of work as the benefits of says Andrew Pegg, Property Consultant better technology become available. for Expense Reduction Analysts. “In Telecommuting of a work arrangement our experience, it does take an expert to in which employees enjoy flexibility in realign a client’s property portfolio, which working location and hours. Simply put, the does require a significant amount of time daily commute to a central place of work is and expertise. The entire process can replaced by telecommunication links. be extremely costly and involve lengthy lease agreements that are not easy to This opportunity is only likely to increase understand. However, most of our clients with new technologies such as the agree a contingency ‘No Saving – No ‘Cloud’ becoming mainstream for many Fee’ arrangement, so the cost is managed organisations which enables staff to access efficiently from the start”, said Andrew. all information they need remotely from the office at any time. Certainly, telecommuting will present an organisation with fresh challenges such Having employees work effectively as managing team working, providing away from the office certainly does have “face time” to share knowledge and build its benefits including, in some cases, a relationships which in turn means that more efficient business process, better the role and function of the office has to risk management and lower overheads. evolve, and new skills have to be learnt. However, there is one cost that can also be significantly reduced when considering the “Overall, telecommuting can be an telecommuting approach; property costs. extremely effective way of making cost savings, and when combined with an “We typically find, that organisations intelligent business restructuring, IT and have already begun to implement policies property realignment programme, the where there employees can work remotely, benefits to an organisation can be huge”, or directly engaging with clients. However, said Andrew. as a result, they are then left with residual high property costs which they are unawareEXPERT NEWS – SIMON PERKINS EXPERT NEWS – INSURANCE TEAMCourier costs for 2012 Have you thought about Employee Benefits?2 011 has seen a significant rise in UK organisations managing their courier costs more effectively with the help of Expense Reduction Analysts. This is not a surprisewith the choice of suppliers increasing over recent years, andeach courier offering different levels of service and price.The following are predictions for 2012, together with howorganisations can take advantage now, in streamlining theircourier costs without impacting on the quality of service.1. Domestic and international couriers are experiencing greater demand for Express Delivery options, as a result of organisations placing greater emphasis on ‘just-in-time’ logistics planning, bringing with it additional costs. What to do now:2. With fuel prices continuing to increase, UK and International 1. Check to see what you are already paying for your couriers will be looking at strategies to offset this cost. It is Express Delivery and whether this is necessary – can predicted that increased charges or innovative surcharges these items be sent by a more economical service? may be introduced early in 2012. 2. Check for fuel surcharges, increased prices and other3. With online sales becoming a significant revenue stream for ‘stealth surcharges’ which begin to make their way onto some organisations, it brings with it additional challenges your invoices - have you noticed any discrepancies? ranging from failed deliveries, the impact on customer Does your courier have any planned increases in 2012? service, through to how to deliver to international addresses. S One expected change is the introduction of time slot 3. Have you ‘mystery shopped’ your courier service tarting from October 2012, all employers will have to enrol their staff in a deliveries and consolidated international mail solutions. recently to see what happens with failed deliveries and pension scheme and make contributions. Auto-enrolment will be phased in how this affects your customers? How much of your between October 2012 and February 2016, starting with the largest employers.4. 2012 will begin to see an increase in the amount of couriers online ordering is repeat business? Employees will also have to contribute unless they choose to opt out. developing applications for smart phones. Text alerts are also expected to become more common, all with extra 4. Always adopt post dispatch management systems There are no exceptions, even for the smallest employers, and there are a complex charges the customers will be expected to absorb. that proactively notify you of potential service issues. range of changes surrounding eligibility and contributions all of which need to be taken Speak to your provider about their solutions. into consideration when planning for this seismic change in the pensions landscape.5. Organisations exporting from the UK by air may be required to comply with enhanced security checks, with the 5. Check with your courier to see if they are introducing For most employers, particularly those that fail to plan for the changes, the advent of possibility of additional security surcharges. any security checks or surcharges in 2012. auto-enrolment will lead to significant extra costs in contributions and considerable additional administration. Despite this, Brian Morgan, Director, Employee Benefits at ERA Insurance Cost Management (ERAICM), says; “Recent research conducted by ERAICM shows that the likely increase in numbers For more expert articles and case studies, joining and the need to match employee contributions means the financial impact for employers currently contributing to employee pension arrangements could be as visit: high as a 40% increase in overall contributions, plus additional administration and management time costs.”