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Profit News October 2011


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Profit News October 2011

  1. 1. PROFIT NEWS iNSiDe THiS iSSUe CSR & Cost Reduction Reducing Waste in the Gas and Electricity Price Hikes Fleet expert Sean Bingham Retail & Wholesale Sectors “Utilities expert Steve letley explains explains how Corporate Glenn Cotter details why companies across the UK need Social responsibility and how implementing waste to consider their utility spends now, effective cost control go minimisation measures can and not in 3 months time” hand in hand. reduce costs by up to 25% “Given these major changes, which will alter the benefits landscape placing new responsibilities and legal obligations onto employers, a long, hard look at the entire structure and delivery of employee benefits is advisable” Brian Morgan, Director – employee Benefitsexpert NewS - iNSUraNCe TeaMEmployee Benefits – review nowor pay later!Unlike your general insurance For most employers, particularly those thatarrangements, which are probably the fail to plan for the changes, the advent ofsubject of some form of annual review, auto-enrolment will lead to significant extrayour employee benefits programme may costs in contributions and considerablenot have been properly reviewed and additional administration. Despite this,tested for a number of years. Brian Morgan, Director, Employee Benefits at Expense Reduction Analysts InsuranceIf this is so, you are not only missing an Cost Management (ERAICM), says;opportunity to obtain improvements in theway your programme is structured and “From the conversations we are havingserviced, you could, as we will demonstrate, with businesses throughout the country, italso be storing up some significant financial is clear that most employers simply do notissues for the future. appreciate just how great these increased costs could be. For large employers, theOne such issue is the potential impact additional expenditure involved in fundingof pension auto-enrolment. Starting contributions alone could run into millionsfrom October 2012, for the first time, all of pounds each year. Yet our experienceemployers will have to enrol their staff in is telling us that few employers are fully the provider and levied from the fund’s “Auto-enrolment is however, only the cost-effective and tax efficient.a pension scheme and make contributions. aware of this, let alone actively planning investments will cease to be payable on latest in a long line of changes within theAuto-enrolment will be phased in between for how auto-enrolment will affect their new schemes, or if a move to a new advisor employee benefits marketplace. Traditional “Given these major changes, which willOctober 2012 and February 2016, starting businesses. takes place. Where this is the case, any ways of accessing employee benefits alter the benefits landscape placing newwith the largest employers. Employees will advisory costs associated with the running provision are changing as fees displace responsibilities and legal obligations ontoalso have to contribute unless they choose “Recent research conducted by ERAICM of such schemes will, in future, have to be commissions and purchasers increasingly employers, a long, hard look at the entireto opt out. shows that the likely increase in numbers met by the employer. Such costs will not be question the value obtained for that structure and delivery of employee benefits joining and the need to match employee recoverable from the employees although expenditure. Old ways of providing cover, is advisable. As we have demonstrated,The introduction of auto-enrolment, the contributions means the financial impact employers may be able to deduct them a ‘cradle to grave’ approach (or at least until the option of simply rolling over yourmost radical change in pensions’ policy for employers currently contributing from contributions. an employee’s projected retirement date), existing programme, year-on-year, withoutin decades, is a key part of the Coalition to employee pension arrangements are increasingly seen as inappropriate as subjecting it to an independent, transparentGovernments welfare and economic could be as high as a 40% increase in “Given this, where an organisation has employees stay with a company for only a and impartial review is one which mayreforms, and is expected to see millions of overall contributions, plus additional a scheme where its advisor is currently few years, rather than several decades. This come back to haunt your company in theworking people saving for a pension for the administration and management time costs. remunerated on a commission basis, it shift in the employer-employee covenant years to come.”first time. There are no exceptions, even should consider reviewing its position now produces new challenges for employersfor the smallest employers, and there are “Our findings also show that few in order that any remedial or restructuring – particularly in the areas of Long Term To find out more about how ERAICM cana complex range of changes surrounding organisations fully understand how their work can take place under the existing Disability, Private Medical Insurance assist you in this key area, please contact:eligibility and contributions all of which pension scheme advisor’s commission commission terms. Once the changes have and Occupational Health provision – andneed to be taken into consideration when arrangements are currently structured. taken place, it will be difficult to change should lead to the consideration of new Brian Morgan, Director – Employeeplanning for this seismic change in the Post the reforms, costs which are currently advisors unless the employer is prepared to approaches to the structure and delivery of Benefits, ERAICM on 01737 226866 orpensions landscape. wrapped up in commissions paid for by pay hefty fees for corporate advice. such benefits in order to make them more
  2. 2. expert NewS - SeaN BiNGHaMCSR and Cost Reduction - deliveringbenefits to both the environment andthe bottom lineAt first thought, you wouldn’t administration burden to be taken on.automatically link Corporate Social Considering the health and safety aspect ofResponsibility with cost control, as an organisation’s CSR strategy, an effectivereducing cost is certainly not the road risk management programme willprimary goal of any CSR programme. have a positive cost positive cost impact on insurance premiums, limit the lossHowever, a recent study by Kenexa High of accidental damage excesses, reducePerformance Institute has revealed that down time of vehicles through repair andorganisations that are genuinely committed ultimately create a more effective workto CSR substantially outperform those force.that are not. The report (which studied175 companies) found that those that Also, for fleets looking to sharpen upwere most committed reported an average their CSR practices; when it comesreturn on assets that were 19 times higher to employing strategies to implementthan the average of those least committed. a cohesive CSR and cost control programme, a holistic approach needs toA core focus with fleet operations in terms be taken which evaluates all the differentof CSR is centred on the environmental areas of cost of ownership within theimpact of its vehicles. Placing a limit corporate departments responsible foron the amount of CO2 emissions being procurement of fleet vehicles.produced is not only beneficial to theenvironment, but will also lower the tax Effective advice and guidance for fleetburden. Indeed additional fuel savings drivers is also essential to achieveare achievable through behavioural optimum Corporate Social Responsibilitymanagement in training staff to adopt the and cost reduction benefits. If you dokey rules of eco-driving. Studies have not have appropriate cost, purchase andproven that fuel consumption can be supplier management expertise in house, “at first thought, you wouldn’t automatically link CSr with cost control, as reducingreduced by more than 10%. However it is it is worth researching the market place cost is certainly not the primary goal of a CSr programme. However, within a fleetbelieved that incentives for drivers will be for experts who can offer unbiased andrequired to maximise the potential savings, objective advice pertinent to a business’s environment, CSr and cost control go hand in hand.”which normally requires a considerable specific culture. Sean Bingham, Fleet Management expert at expense reduction analysts expert NewS - paUl DaviDSoNMerchant Card PCI-DSSGuidelines updated August 2011 saw the PCI Data Security the development, management, education, Council take the opportunity to update and awareness of the PCI Data Security it’s guidelines for merchants using Standard (PCI DSS) and related standards Wireless technology to collect payments that increase payment data security. from customers. Founded in 2006 by the major payment The Payment Card Industry – Data card brands American Express, Discover Security Standards (PCI-DSS) lay down Financial Services, JCB International, minimum security requirements and MasterCard Worldwide and Visa Inc., the guidelines to all merchants, including the Council has more than 600 participating growing number of merchants employing organisations representing merchants, ‘Tokenization’. These regulations have banks, processors and vendors globally. been created as part of an overall aim to “Wireless networks continue to be an easy reduce the level of data breaches where target for data compromise, especially customer card details are stolen. Failure to as new devices are added to these comply with these standards or incidents environments.” said Bob Russo, General leading to data loss can lead to substantial Manager of The PCI Security Standards fines and brand damage. Council. “This resource remains an important tool for understanding how to Tokenization is the process of replacing secure your payment card data when using sensitive data with unique identification wireless technologies.” symbols that retain all the essential information about the data without The guidelines are designed to help compromising its security. Designed to merchants to interpret the PCI-DSS minimise the amount of data a business standards, so are not prescriptive and do needs to keep on hand, this practice has not change the standards. Each merchant become a popular way for small and mid- must ensure that their individual operation sized businesses to strengthen the security complies with the PCI-DSS standards. of credit card and e-commerce transactions whilst minimising the cost and complexity To find the guidelines on Wireless of complying with industry standards payment and Tokenization, visit the PCI and government regulations, such as Security Standards Council website: www. those outlined by The PCI Data Security where merchant Council. payment guidance, Self-Assessment Questionnaires, lists of qualified Assessors The PCI Security Standards Council is an and valuable information is available. open, global forum that is responsible for
  3. 3. expert NewS - THe CoMMS TeaMHave your rates to call mobiles dropped?From April 2011, OFCOM has enforced benefiting from this reduction.a reduction in Mobile Termination Rate(MTR). The MTR was originally introduced to allow the Mobile Network ServiceThe MTR is the amount that the Mobile Providers to recoup their investment inNetwork can charge the originating building the network infrastructures butnetwork (e.g. BT) for inbound calls to their OFCOM, under sustained pressure fromnetwork, this has been reduced from 4.18p/ BT, has decided that the Service Providersmin to 2.66p/min. have had sufficient time to cover those investments and over the next few yearsFor example, this means that it now costs MTR will drop to close to 1p/min.BT less to route your call to a Vodafonemobile and O2 less to route your call to However, this is not all good news; Thean Orange mobile. Essentially, it is now reduction in MTR will impact the revenuescheaper to route all cross network calls to of the Mobile Network Service Providersmobiles. and whilst the strong levels of competition will prevent them from increasing their The Expense Reduction AnalystsBut there is evidence that these savings headline business rates they will be looking Communications Team have tools to quicklyare not being passed on to all end-users, for areas where they can up their prices and and easily analyse your communicationsso companies should scrutinise their it is likely that the hardest hit will be pay- costs and advise you on how to get the bestbills carefully to see if they are actually as-you-go customers. value from your NewS - GleNN CoTTerTop ten tips for reducing waste inthe Retail and Wholesale sectorsTop ten tips for reducing waste in the Most UK businesses can reduce their waste The recycling ethos… The significant cost savings and sandwiches without the need for anyRetail and Wholesale sectors costs by 1% of turnover. This is equivalent • Avoid producing waste in the first place improved efficiency achieved with waste alteration or redesign. The trays are no to increasing sales by 10% or even 20%. • Minimise the amount of waste you do minimisation allow companies to maintain longer used just once, but are re-used atReducing operating costs and overheads Shopping centre managers in the UK produce their position in a very competitive UK least three times. Broken trays are returnedis paramount for companies operating currently spend about £36 million/year • Use items as many times as possible market. It will also put them in a strong to the supplier for recycling.within tight margins and in a competitive on waste disposal. This cost is expected • Recycle what you can only after you position to deal with the increased The benefits have included:marketplace. to rise to £39 million/year by 2012. Given have re-used it competition arising from the breakdown • estimated savings of over £125 000/year the true cost of waste there is a strong • Dispose of what’s left responsibly of European and global trade barriers. • savings of approximately 200 tonnes/The cost of waste is typically 4% of business case for taking action to prevent year of plasticturnover – in some companies it can be and reduce waste. Waste minimisation Why reduce waste… Improve management control • savings of approximately 270 tonnes/as high as 10%. Implementing waste focuses on avoiding waste from occurring. Some of the main reasons for reducing the A systematic waste minimisation year of cardboard reduction in theminimisation measures can reduce these Waste management focuses on how best to amount of waste your company produces programme gives greater understanding packaging obligation costs for Boots andcosts by a quarter – often with little or no deal with wastes that do occur. are detailed below, along with advantage of material use, utility consumption, waste its suppliersinvestment cost. Across the retail sector as it can bring… generation, waste management proceduresa whole, this could result in cost savings of In the retail sector, implementing a and waste disposal costs. This knowledge Top Ten Tips for reducing£2.25 billion/year. systematic programme to minimise waste Increase profits allows greater control of what is happening waste in the Retail and can reduce the costs associated with: Most UK businesses can reduce their and the associated costs. Wholesale Sector…Waste minimisation is good environmental • packaging waste costs by 1% of turnover. This is 1. Separate waste at source (particularlypractice and good business practice. • waste disposal equivalent to increasing sales by 10% Improve their image cardboard and polythene) and send forReducing material consumption and • water use or even 20%. In a business where profit Greater public awareness of environmental recycling.waste generation while providing the • heating and lighting margins are tight, a reduction in waste issues has increased pressure on retailers, 2. Separate food waste – particularly ifsame service reduces both environmental • warehousing product returns costs can be the difference between profit suppliers and shopping centre managers to a waste compactor is used to preventimpact, and costs whilst improving those • damaged goods and loss. Maintain competitiveness. improve their environmental performance. odours and contaminated run-off (theall important profit margins. • transport Service providers that can demonstrate compactor may hold waste for a number • buildings and grounds maintenance good environmental practice have a of days). marketing advantage. 3. Arrange for returns and unsold products to be sent back to suppliers. Achieve cost-effective compliance with 4. Re-use packaging materials (e.g. bubble environmental legislation wrap and boxes) and use re-usable Retailers are subject to a number of wood, metal or plastic pallets/crates for regulations and other mandatory charges, regular deliveries. e.g. Duty of Care, the packaging waste 5. Fit water saving devices in toilets and regulations and landfill tax. The costs of washrooms, e.g. urinal timers and both waste disposal and compliance with cistern volume adjusters. environmental legislation are set to increase 6. Turn off lights at night and during further in response to these and other factors. closed periods. 7. Ensure heating, boiler, air conditioning Adopt a systematic approach… and lighting programmes are A successful waste minimisation programmed correctly to turn off programme is one based on a systematic at night and when premises are approach that involves: unoccupied and that these systems are • measuring material use, utility regularly maintained. consumption and waste generation 8. Install energy-efficient heating, boiler, • planning air conditioning and lighting systems. • identifying priorities for action This is particularly relevant for lighting • setting targets that is in high/continuous use. • implementing waste minimisation measures 9. Set budgets and/or benchmarks for key • monitoring material, utility and waste management costs (e.g. £/m2 of floor space/year or These ‘Boots’ were made for kWh/m2 of floor space/year for energy). recycling… 10. Obtain bills from head office if they The Boots Company has developed a are not received at the branch. Develop system for re-using the plastic transit incentive schemes to reward waste trays for the delivery and display of its reduction and efficient use of energy.
  4. 4. SucceSS Story - Wharfedale expert NewS - STeve leTleyExpense ReductionAnalysts deliver Gas and electricityamplified savings price hikes Not only does this simplify the administration, this will also allow companies to take advantage of better pricing as energy providers will offer betteron Wharfedale’s rates depending on the level of business Gas and electricity price hikes have Companies also need to be smart when being placed. commanded a lot of attention recently. negotiating new contracts to reduce the burden of the recent price increases; in a Energy efficiency should also be looked at,courier costs These price increases have been caused very volatile market that sees changes on a as by reducing the energy used, companies by a number of world events including day to day basis, this may be achieved by can make significant reductions on their uncertainties in the Middle East and the simply approaching the bills. Fairly easy steps can be taken to earthquake and Tsunami in Japan which market at the right time reduce consumption, this may involve in turn have caused worries about supply and not when the market looking at replacing equipment which shortages going forward. is at a peak. However, will involve capital costs or it could be as companies can also simple as looking at internal policies for With these price hikes in mind, together obtain an advantage powering off computers terminals and other with clocks going forward and the colder by trying to bring equipment. months fast approaching, now is the time to all energy contracts think about Utilities supply arrangements. under the umbrella What is clear is that companies need to of a single supplier consider their Utility spends now and not inWharfedale has been part of the IAG sufficiently in the courier market – suppliers Companies need to review their Utilities with a single 3 months time when the cold dark nights areGroup Ltd. since 1996. Always at the had merged, services had been enhanced – supply arrangements on a regular basis to contract end date. well and truly upon us.forefront of loudspeaker design, from that it might be worth Wharfedale’s while ensure they are in appropriate’s conception in 1932 by Gilbert Briggs, for Steve Parrott to review their courier In some cases, companies who have notWharfedale is one of the most creative costs again on a contingency basis. negotiated new fixed term contracts mayand innovative companies in the market. be paying in excess of 50% more than theyPioneering products such as the Diamond Steve Parrott describes the result: “What need to for their energy supply! In this dayseries, which first defined the market for I found was very significant. Not too long and age, that could prove very costly.bookshelf speakers and are now regarded after we finished our two-year monitoring,as ‘classic’ designs, were firsts of their kind. the supplier started to edge his prices up – changing the basis of volumetric weightContinuing this tradition, IAG has invested calculations, increasing fuel and otherin and developed new manufacturing surcharges, and increasing the per kilo rate –processes and technologies, and an to the extent that they had eventually clawedinnovative building process that has enabled back between 16 and 17% of the 19%them to produce high quality materials for a saving we had originally identified. And thefraction of the cost. only notification that Wharfedale got of any of these changes was in very small print onPaul Wheatley of Expense Reduction the last page of an 8-9 page invoice.”Analysts reviews the partnership betweenhis company and Wharfedale: “Looking “It is only something that a regular,back, it is the courier project that stands detailed review could have noticed.”out. It certainly had its twists and turns. But, Tim Harris comments: “I was naturallygoing back to the beginning, when we first surprised by what Paul and Steve showedgot the go-ahead from Tim Harris to look at me. That is when I realised the true valuethis area, I was fortunate to be able to call of their service. To be fair to my guys,upon the expertise of my colleague, Steve there is no way in the world that we couldParrott, to analyse the spend.” have devoted sufficient time and effort to recognise that these prices were creepingSteve Parrott comments: “The initial project back up. It is only something that a regular,followed the normal pattern. After looking detailed review could have noticed.”in detail at their expenditure in this area, wewere able to recommend various changes Steve Parrott then analysed the marketwhich resulted in a 19% saving. As is the on Wharfedale’s behalf, recommending expert NewS - CHariTy SpeCialiSTnorm, we then undertook our two years’ changes implemented in the summer of Ten tips for reducing yourmonitoring service, to ensure that these 2011, which will realise 36% savings.savings were realised across that period. The significantly better savings, delivered through an alternative supplier, reflect the“What I found was very significant” many changes that had taken place in the charity’s expenditure“At the end of that period, Tim Harris took supplier market. These changes promptedthe decision not to opt for our ongoing the recommendation on this occasion toservice, and in all honesty, you can see the switch suppliers to one whose servicelogic behind this. The incumbent supplier profile better matched Wharfedale’s needs.had retained the business so had beenknown to Wharfedale for many years; the Tim Harris summarises the value of Neill Summerfield, an Expense Reduction the expense is vital to the charity managerial control is vital to ensure coststariffs were set. On the face of it, there was Expense Reduction Analysts’ service Analyst consultant, recently helped the are kept to an absolute minimum. If this isnothing that necessitated monthly analysis.” to his business: “I cannot recommend Royal Academy of Dance save over £1m Tip 4: Be Objective – Weigh up all options not possible all purchases need to be visible Paul and Steve and the service that their in costs. These are his top ten tips on and look at the issue from all areas of the through statements and receipts.Paul Wheatley continued to manage the company delivers, highly enough. They do how other charities can reduce their own charity before making the decision to cut oraccount’s other requirements, and fifteen something which no business – certainly expenditure. change supplier. Tip 8: Read the small print – Charitiesmonths after Expense Reduction Analysts no business of our size – could do. They often get stung as they haven’t fullyhad ceased the routine monitoring, in the find savings, and they make sure that those Tip 1: Have a thorough review – Many Tip 5: Shop around – It’s tempting to stay understood the legalities behind contractscourse of a general discussion, he suggested savings are realised for as long as one asks charities decide to cut costs but don’t with the same suppliers for years due to lack and agreements with suppliers. Alwaysto Tim Harris that things had changed them to do so.” carry out a thorough review first and make of time to ‘shop around’, but this time can read the small print before signing any rash decisions that might not be the most equate to large cost savings. What was the contract and seek advice if unsure. effective cost savings in the long run best deal 5 years ago probably isn’t now, so“expense reduction analysts have Tip 2: Make a list and prioritise – After look at what other suppliers can offer. Tip 9: Keep up-to-date – Technology is evolving as fast as ever and there areproved that they can add profit to my conducting a review, list every element Tip 6: Negotiate – Suppliers across all always new ways of making tasks quicker of expense within the charity and look at sectors and industries want your business and easier.bottom line. They are experts at staying the ROI of each of the costs, this will help so barter with them. Don’t automatically make clear which expenditures to cut first. take the first offer; keep going back to Tip 10: Don’t lose sight of quality – Inon top of the detail of costs to ensure that each telling them you’ve been offered a difficult economic times cutting costs Tip 3: Listen to staff – After recognising better price. might seem like the only way to survive,they are realised over the longer term” potential cost savings speak to staff about but never make any decisions that will their thoughts on reducing the expenditure. Tip 7: Take Control – Many charities allow impair on the quality of your services. It’sTim Harris, Managing Director, Wharfedale They might agree or point out a reason why staff to make purchasing decisions but just not worth it.