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Business Fitness for Retail & Wholesale             Effective cost management strategies                         for healt...
About Expense    Reduction Analysts    Expense Reduction Analysts is a leader in cost, purchase    and supplier management...
Introduction fromRobert Allison,Managing Director,Expense Reduction AnalystsWelcome to the first in our series ofBusiness ...
Retail and Wholesale    – the marketplace in 2011    Tracy Follows introduces the issues facing your sector    Between 200...
harder at the quality of the merchandise and   Most retailers have revisited their businesstaking more time to consider hi...
From Chip and Pin    to Carrot and Stick    Steve Whitlam describes the changing landscape    of the credit card industry ...
It is very unusual for us to find that retailers   The other primary area of avoidable costs isare not now capturing the 3...
Savings and service    – the vital combination    Derek Hodd discusses what to look for in a retail    sector supplier    ...
“It’s the way we’ve always done it”                   “We always get three prices”It always pays dividends to review your ...
Best practice in action   Taking a slice off the costs for Pizza Hut   Gerard Carolan, Financial Controller for Pizza Hut ...
Best practice in action                                     Tailor-made profits for Aquascutum                            ...
find extra profitArgentina Australia Austria Belgium Brazil Canada Chile China Colombia CyprusDenmark Ecuador Finland France...
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Business Fitness For Retail & Wholesale

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Business Fitness For Retail & Wholesale

  1. 1. Business Fitness for Retail & Wholesale Effective cost management strategies for healthy profits in 2011
  2. 2. About Expense Reduction Analysts Expense Reduction Analysts is a leader in cost, purchase and supplier management and focuses on reducing operating costs, whilst maintaining or enhancing service levels, for private, not-for-profit and public sector organisations. Expense Reduction Analysts works in • Review and re-engineer procurement functions, partnership with its clients, offering the in order to ensure optimum buying process; expertise and resource to: • Facilitate high value supplier relationship management programmes, in order to create • Forensically examine and benchmark up to mutually beneficial working partnerships. a hundred areas of business expenditure, in order to present opportunities for Expense Reduction Analysts has 170 consultants significant savings; across the UK, and numbers Paul Smith, Scotmid, F Hinds, Pizza Hut and Aquascutum among its retail and wholesale clients.2 Expense Reduction Analysts About Expense Reduction Analysts
  3. 3. Introduction fromRobert Allison,Managing Director,Expense Reduction AnalystsWelcome to the first in our series ofBusiness Fitness Guides for 2011, focusingon effective cost management strategiesin the Retail and Wholesale sector.After the December snows hittingpre-Christmas sales, the VAT increase inJanuary, and the seemingly never-ending risein fuel prices, you will be glad to hear that wehave good news for you.The good news is that you can increase profits– without selling any more product. With therelevant expertise, it is possible to reduce costssignificantly. And this guide is all about settingyou on your way to doing just that. This booklet is packed with information, advice and tips from consultants who specialise in theWe know that, in retail and wholesale, you retail and wholesale sector – as well as two casehave to keep one eye on service levels at all studies that demonstrate best procurementtimes. It is no good switching suppliers to get practice in action.an extra percentage point or two, if the servicestandards of the new incumbent compromise I hope that you find it valuable – and may I wishyour commercial activity. you a successful year in 2011. Introduction from Robert Allison Expense Reduction Analysts 3
  4. 4. Retail and Wholesale – the marketplace in 2011 Tracy Follows introduces the issues facing your sector Between 2000 and 2008, retail sales grew In this changing market, consumers are also year on year by around 4% with half of all demanding real value, with quality and spending being classed as indulgence’ service becoming important factors purchases. During a downturn, this is the alongside price, especially for major most vulnerable area for retailers, as purchases. In the early 2000s, value was consumers revisit their budgets and revise often confused with price, but the more their luxury, non-essential spending. sophisticated consumer is now looking4 Expense Reduction Analysts Retail and Wholesale – the marketplace in 2011
  5. 5. harder at the quality of the merchandise and Most retailers have revisited their businesstaking more time to consider his or her strategy to cope with the online marketplace,purchase. Technology is driving this trend as well as the economic downturn. However,with a proliferation of Internet comparison some well-known but poorly financed namessites and Smartphone apps. have vanished from our high street, leading to an overcapacity in premises, all too evidentWhile most retailers have been swift to from the empty shop-fronts. While this mayaddress the changes in consumer spending put retailers in a strong position with many ofhabits brought on by the increasingly their landlords, on the other side of the coin,dominant Internet, the impact of online there has been the negative impact of thespending continues to have an effect on high Business Rate Review in 2010.street sales. In the light of all of these financial pressures, it is clear that good housekeeping and cost reduction should now be an essential part of any retailer’s operational strategy. Retail and Wholesale – the marketplace in 2011 Expense Reduction Analysts 5
  6. 6. From Chip and Pin to Carrot and Stick Steve Whitlam describes the changing landscape of the credit card industry Having seen chip and pin become widely After a few years of a softly-softly “carrot” accepted by cardholders and retailers for approach, the “stick” has appeared in terms of face-to-face transactions, the card industry increased – and avoidable – transaction costs has turned its attention to cutting identity and penalties where businesses do not comply fraud where the retailer and cardholder with the common standards for cardholder not don’t meet. present (CNP) transactions through mail-order, by telephone or via the internet.6 Expense Reduction Analysts From Chip and Pin to Carrot and Stick
  7. 7. It is very unusual for us to find that retailers The other primary area of avoidable costs isare not now capturing the 3-digit signature to ensure that cardholder data is handled instrip code in all CNP transactions, but it is compliance with Payment Card Industry Datacommon to find a belief that it is adequate Security Standards (PCI-DSS), and whenfor web transactions. While it is a useful tool systems are compliant, to ensure that thefor reducing the potential for fraud when merchant acquirer is aware. Penalties can betransactions are through the Internet, cost as high as 0.85% of all transaction values andsavings flow from 3D Secure being in place. the solution can be as easy as filling in a form(3D Secure is the catch-all name for systems for smaller retailers with only face-to-facesuch as Verified by Visa or MasterCard transactions.Secure Code.) It is more complex for larger retailers andThe non-compliant will have their ability those who transact through mail order,to accept card payments revoked telephone or the Internet, but I believe that it will not be long before the non-compliant haveEven where 3D Secure is available, it is often their ability to accept card payments revoked.not functioning and penalties run on averageat 0.5% of credit card transaction values and10p per debit card transaction. Every singlepenny of that penalty is avoidable. From Chip and Pin to Carrot and Stick Expense Reduction Analysts 7
  8. 8. Savings and service – the vital combination Derek Hodd discusses what to look for in a retail sector supplier Retailers are naturally looking for good It is therefore vital that service accompanies prices in the products and services they savings. purchase – but not at any cost. Retailers have to be service-orientated, and any Retailers also value new ideas – retail is detail change in supplier must not be allowed and sometimes the smallest change in to interfere with the service levels they merchandising, for instance, can reap huge need to receive in order for them to be benefits in sales. It is therefore important to competitive. To take an obvious example, partner with suppliers who are ahead of the switching distribution suppliers must not curve, who can advise on what the market is stop the right products getting onto the doing and where it is going. There was the right shelves at the right time. case recently of my advising a client to switch to a different printer: their existing one was not really proactive, but their new printer is providing much added-value by doing such things as advising them on the new media that are available, like vinyl static mats on which to print sales messages. In general, it is important to think of your suppliers as potentially strategic partners. Suppliers can do so much more than simply deliver on time and to a price.8 Expense Reduction Analysts Savings and service – the vital combination
  9. 9. “It’s the way we’ve always done it” “We always get three prices”It always pays dividends to review your actual It is surprisingly rare for a company tocurrent requirements. I analysed one retailer’s undertake a proper survey of the marketplacecash handling needs. The profile had not and thus to procure from an informed position.changed since the days when everybody paid Often, different departments use differentin cash or cheque. I carried out an extensive suppliers for the same product or service.analysis of their collection profile and their Sometimes, it takes me quite a while just toneeds, and was able to recommend changes gather all of the relevant data together, beforethat suited their current requirements far commencing a comprehensive review.more closely. It is therefore not surprising that busy retailersIt is obviously important to look at the rates themselves struggle to undertake theiryou are paying, but it is also vital to look at the reviews, but the time and effort can paybacksurrounding processes and overall business handsomely.need. It is often the case that differentdepartments deal with different aspects, and“joining up the dots” is overlooked. Savings and service – the vital combination Expense Reduction Analysts 9
  10. 10. Best practice in action Taking a slice off the costs for Pizza Hut Gerard Carolan, Financial Controller for Pizza Hut (UK), recalls his initial discussions with Expense Reduction Analysts’ Nigel Rosehill, “During our first meeting, Nigel was immediately able to relate to our procurement issues due to Expense Reduction Analysts’ own varied experience drawn from their existing diverse client base. This knowledge enabled him to identify those areas where we might encounter challenges from an early stage in the investigations. Category % saving When they met with key personnel from Pizza Print 15% Hut (UK), there was a minimal amount of Print Logistics Distribution 40% disruption to the ongoing business. “It soon became clear that our whole print “All reports have been clear and concise and process was a complex area and that we could backed up by detailed analysis, which has benefit from an independent viewpoint. enabled us to take well-informed decisions. Given the diverse nature of our print Nigel and Paul were then able to follow requirements and the large number of staff through the recommendations by handling ordering print, we needed a strategic review the negotiations and implementation. of the processes, policies and procedures adopted, and identification of potential areas “This, in my mind, is one of the key reasons of improvement. why Expense Reduction Analysts is so successful. Its analysts are totally focused, “I could see the value of the immediate which means they are able to meet deadlines manpower that Expense Reduction Analysts and actually make things happen!” could bring to Pizza Hut (UK), and so we agreed that this analysis would be undertaken with the Pizza Hut Profile aim of focusing on key areas and looking at Pizza Hut, with 12,000 outlets in 90 countries specific unit costs.” and more than 300,000 staff, is the largest pizza restaurant company in the world. Pizza The detailed terms of the brief were agreed and Hut serves more than 1.3million pizzas every Gerard appointed Max Wright, Commercial day to approximately 4million customers Procurement Manager of Pizza Hut (UK), as the worldwide. Pizza Hut (UK) is a household key contact point, whilst Nigel invited fellow name and is known to be a dynamic, Analyst Paul Fordham to join him on the project. fast-growing company and a market leader in the UK pizza restaurant and home Max explains, “We are delighted with Expense delivery industry. Reduction Analyst’s work! Nigel and Paul were highly focused and were able to pinpoint exactly how best to approach this project.10 Expense Reduction Analysts Best practice in action
  11. 11. Best practice in action Tailor-made profits for Aquascutum Chris Carlisle, Finance Director for Aquascutum, engaged Expense Reduction Analysts consultants Andrew Lees, David Mitchell and Derek Hodd to review the company’s expenditure levels in a number of cost areas.Category % saving £ saving Richard Anson, renowned amongst his ExpensePackaging 27% £15,000 Reduction Analysts colleagues for his knowledgeMerchant fees 15% £14,746 of the packaging industry, reviewed this costStationery 40% £12,848 area for Aquascutum. He used his expertise toFacilities contracts 36% £14,690 suggest alternative packaging designs whichCash handling 68% £14,425 are not only cheaper to produce, but will enableCleaning 5% £4,117 more garments to be packed into each box,Print 49% £32,456 thus reducing the number of boxes purchased.Total £108,282 Winning the respect of client staff quicklyThe strength of Expense Reduction Analysts isits people. Andrew Lees and David Mitchell Chris Carlisle explains: “Obviously thewere able to draw upon the experience and appearance of our products is extremelyknowledge of their fellow consultants to assist important. Richard understood this completelywith different areas of the analysis work. and, despite achieving a significant profit,Fellow consultants Keith Robinson, Marc Page ensured that the packaging changes had noand Derek Hodd joined the project team to impact upon the way the product looked oncereview Aquascutum’s spend levels on facilities it was unpacked.”contracts, cleaning and cash handling Chris has been extremely pleased with the workrespectively. carried out and concludes: “My experiences ofMeanwhile, Expense Reduction Analysts’ cost management specialists were mixed prior toHartley Jenkinson was invited to analyse engaging Expense Reduction Analysts, as muchexpenditure on merchant card fees and depends on the manner in which the consultantsstationery. In both instances, following tender engage those involved in the buying process.to a number of alternative suppliers, it was “In the case of Expense Reduction Analysts,agreed that Aquascutum should remain with the consultants have won the respect of thethe existing suppliers, both of whom were very staff quickly, due to their in-depth knowledgekeen to keep the business. This meant there of their specialist areas and their willingnesswas no disruption to Aquascutum and to understand the specific requirements ofnegotiations ensured that good profit a prestige brand such as Aquascutum.”improvements were achieved in both areas. Best practice in action Expense Reduction Analysts 11
  12. 12. find extra profitArgentina Australia Austria Belgium Brazil Canada Chile China Colombia CyprusDenmark Ecuador Finland France Germany Greece Hungary Ireland Italy Jordan KoreaLuxembourg Mexico Morocco Netherlands New Zealand Panama Philippines PolandPortugal Spain Sweden Switzerland Taiwan United Kingdom United States Uruguay Expense Reduction Analysts www.expense-reduction.co.uk

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