ERA - Market intelligence - June 2016

Issue No. 16.3Insight and market analysis to achieve better value from suppliers
MARKET
INTELLIGENCE
ERA’s Fleet expertise benefits
British Telecom’s Fleet operations
BT Fleet, the specialist fleet management
business of the BT Group, appointed ERA Fleet
Cost Management to join their working group
to review the internal BT management
car fleet.
The project included an in-depth review of the
existing policies and processes involved in the
provision of management grade company cars
including manufacturers and pricing strategies.
ERA Fleet Cost Management provided significant
discount improvements across a wide range
of manufacturers, together with a substantial
increase in the operational efficiencies
regarding the provision of the company
car fleet.
“ERA was engaged to assist the internal review
of the company car fleet to reinvigorate the
company car scheme and provide an improved
defined benefit for our core management
grade employees. Their interaction challenged
existing practices and delivered substantial
improvements in both costs and processes that
have resulted in a much enhanced car scheme.”
Duncan Webb, Commercial Director, BT Fleet
“ERA’s interaction challenged
existing practices and delivered
substantial improvements
in both costs and processes
that have resulted in a much
enhanced car scheme.”
Duncan Webb, Commercial Director,
BT Fleet
For more information please visit:
WWW.EXPENSE-REDUCTION.CO.UK

Frankly, an overcrowded, overcomplicated market place with
few sellers - often with few scruples…
Postage by Nick Clement
Does your franking machine represent the
best value for money for you company? Are
you fully aware of all costs associated with
running the machine? And when do you need
to change the machine? When the suppliers
say you should or when you want to?
There are sound commercial reasons to use
Royal Mail. The cost of sending a franked
Second Class letter under 100 grams is 30%
less expensive than using postage stamps and
there is a further significant discount for using
the relatively unknown Mailmark™ channel.
There are also other intangible benefits to
franking - such as speeding through the mailing
system and the professional impression made
by a (sometimes bespoke) franked image versus
ordinary postage stamps.
However, there are only four manufacturers
in the market, with the top two supplying in
excess of 70% of all machines purchased in the
UK, therefore controlling price and supply.
This market sector’s sales practices have often
been called into question, starting sometime
ago with an investigation by the Office of
Fair Trading.
The major criticisms have centred on a number
of areas such as questionable sales tactics, the
high cost of leasing, the “discouragement” to
purchase, the high cost of maintenance with
additional hidden charges like the costs of
recharging the meter per top-up, and the cost
of inks and labels.
Industry figures indicate that the working life
of a franking machine is in the region of ten
years. This should be expected of such relatively
technically simple machines that work, unless
used in a mailing centre for only a few hours
a day.
The industry standard term for a lease/rental
agreement is either 60 or 72 months dependent
on the supplier. However, it is estimated that
a machine financed in such a way will be
upgraded by the supplier within three and a
half years from the time of initial installation.
The balance attributable to the old contract is
then settled and rolled into the new contract,
generally at a higher quarterly cost. This ‘rolled
over’ figure can sometimes account for up to
50% of the total payments being made.
It is estimated that purchasing outright
represents approximately only 19% of machines
licensed by Royal Mail. This figure is low when
compared to other market sectors and can
possibly be attributed to the influence from the
two market leaders.
All franking machines licensed in the UK are
required to have a service contract in place
and have to be inspected annually, as ‘one-off
call-outs’ are generally not available. They also
need to be maintained by Royal Mail approved
technicians and the level of service differs
very considerably.
For example, if your machine breaks down will
it be replaced, repaired on the spot or taken
away to base? Will you have to pay for parts?
Does it include telephone support? Quite often
it is not clear whether the service contract
includes the cost of postal updates. Sometimes,
the Royal Mail updates their prices and services,
which means your machine might need
updating too.
Service contracts typically range from 10% to
16% of the price of the machine per annum and
the levels of cover being offered can
be confusing.
As with computer printers, the running cost of
the equipment can look very modest at first but,
when calculating the total cost of ownership
including the cost of the relatively expensive
consumable items such inks and labels, the
whole financial picture can change. Confusion
can arise if it is incorrectly assumed that they
are included for the full working life of the
machine when they are not.
Despite stern warnings from the supplier not to
use compatible goods (which tend to be around
40% less expensive) you may find they work just
as well.
The advice is clear. As the contracts for the
supply and maintenance of franking machines
are not as straight forward as they seem,
a careful comparison of alternative options
available is essential, with close attention
to the terms and conditions being offered.
A final word of caution: as with all contractual
agreements make sure you fully understand
what is being offered and always ensure that all
negotiations are recorded in writing.
Photo credit: Lolostock / Shutterstock.com
However, there are only four manufacturers in the market, with the top
two supplying in excess of 70% of all machines purchased in the UK, and,
therefore, controlling price and supply.
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Market Intelligence Market IntelligenceIssue No. 16.3 Issue No. 16.3

Important for importers and exporters using
Sea Freight services is the deadline for the
introduction of regulations on the verification
of packed container weight on 1 July, 2016.
The amendments to the Safety of Life at
Sea Convention (SOLAS) by the International
Maritime Organisation (IMO) mean that from
July packed containers will not be loaded
without evidence that the gross weight has
been verified.
We may fear the image of vehicles lining up at
the docks to be weighed at the weighbridge at
the risk of not being loaded, but the regulations
do provide for a number of weight verification
methods to ensure compliance. However,
estimating the weight will not be an option
and as time is running out you do need to make
sure that you have the requirements covered to
ensure that your containers are not delayed as
this change is introduced. More information can
be found at www.worldshipping.org
Have you simplified your import VAT payment?
As an importer how often have you been caught
out by the following situation? You are into
your peak period management and a critical
shipment has just arrived but is being held in
customs because you have hit your deferment
limit. A flurry of activity follows and perhaps
with the support of your Freight Forwarder you
have secured the release of your shipment but
at the cost of time, effort, additional fees and
delays to your inbound supply.
For a number of years HMRC has been offering
an effective way to avoid such inconvenience
with ‘Simplified Import VAT Accounting’ or SIVA
for short.
When approval is in place the requirement to
provide a bank guarantee for the value of VAT on
your imports is waived and at 20% on value this
will certainly be using up a significant part of
your deferment limit. A guarantee needs to be
maintained to cover your expected duty charges
but the overall level will be much reduced.
Of course, there is an application process as
HMRC will check your financial history and track
record with import Duty and VAT administration
- but the benefits are dramatic. If you don’t
have SIVA in place already then don’t delay your
application any longer, as there may still be
time to make arrangements before your busiest
time of the year.
All the background and application forms can be
found at:
https://www.gov.uk/government/publications/
notice-siva-1-simplified-import-vat-accounting
New legislation on Container Weight Verification
Logistics by Kevin O’Neill
WWW.EXPENSE-REDUCTION.CO.UK4
Market Intelligence Issue No. 16.3

The burden of legislation affecting Waste & Recycling
Waste & Recycling by Pete Bramhall
In recent years, organisations have been
saddled with an ever-increasing burden of
legislation relating to waste and recycling -
at the last count we had identified 76 pieces
of legislation applicable either to the UK as
a whole or within individual countries. Not
to mention the 15 EU directives which drive
much of this!
Keeping up with new and amended legislation
isn’t easy and the documentation available
online often leans towards technical detail
rather than practical advice. I have lost count
of the number of clients who have told me that
they just can’t keep track of it all!
For organisations with a national scope, matters
are further complicated by different regimes
in force across the UK. For example, Scotland
leads the way in relation to food waste recycling
by requiring all businesses to segregate food
from other wastes for separate collection.
Initially the threshold was 50kg per week, but
from 1st January 2016 this was reduced to 5kg,
bringing many more businesses into scope.
Across the UK, an increasing impact is also being
felt from the Materials Recycling Facility Code
of Practice. This governs facilities which sort
mixed materials (e.g., card, paper, plastics,
metal, glass) into separate sections for recycling
and limits the amount of contaminants they
are allowed to reject. Although this took effect
in October 2014, it was a while before the
impact was felt by waste producers. We are
now seeing suppliers strictly limit the types
of materials that can be disposed of in “Mixed
Recycling” containers and enforce much tighter
contamination rules.
With it has come higher pricing too. Landfill tax
increased on 1st April by £1.80 per tonne and
in previous years the landfill tax escalator had
usually led to a greater increase for General
Waste services compared with Mixed Recycling.
However, this year the situation is reversed and
suppliers have been seeking increases of up to
9% on Mixed Recycling collections.
On a more positive note, and in a rare reversal
of the trend towards greater waste regulation,
the rules relating to how businesses handle their
hazardous wastes have been relaxed since 1st
April. Up until now, any organisation generating
more than 500kg of hazardous waste per annum
in England needed to register with (and pay a
fee to) the Environment Agency. As part of the
Government’s drive to reduce red tape, this
requirement has been removed.
Mind you, regulations for hazardous waste still
differ in Wales, Scotland and Northern Ireland.

Payments Predictions
Banking & Payments by the Payments Team
Paul Davidson, Steve Whitlam and Paul Lucraft
from our Payments Team see ‘change’ as the
norm over the next two years. Change brings
a range of challenges, opportunities and
potential solutions which they discuss here.
The next 18 months will see many new
regulations, which will open up the market and
enable more flexible solutions to be delivered
from a wider range of providers.
Flexibility can be a ‘double-edged’
sword though:
• In mid-2016 the ‘honour all cards rule’
stops, so merchants can choose which types
of Visa and MasterCard to accept. This
implies signage showing cards accepted, and
restricting card types risks lost sales.
• Rules already allow multiple brands/types
to appear on a single card (e.g. Visa debit
and MasterCard credit). Soon, when such a
card is presented, the merchant must allow
the customer to choose which brand to
use. That works fine generally, but consider
contactless, especially on public transport
as, quite aside from building in a delay
(unacceptable to commuters) there is no
screen or button to allow the consumer to
make the choice. The regulators missed that!
The goal is a Single European Payments Area
(SEPA), enabling businesses and consumers
to ‘pay’ across European borders as cost
effectively as domestically.
Many elements of SEPA will pass into law
without member state revision, but many
others will require adoption, making variations
almost inevitable. Even for mandatory change
national variations exist, with Visa Debit in the
UK charged at 0.2% plus 1p (capped at 50p* per
transaction) while in Eire debit transactions are
capped at 0.1%. Both of these undermine the
Pan-European consistency sought.
SEPA - Opportunity for new solutions:
Being positive, SEPA should make it easier for
new entrants to emerge, by such methods as
forcing the banks to open up their services
to others. Whilst these may not become
mainstream in 2016/17, when considering
partners for any solution, it is essential that you
look ahead at least 3 years to consider what
will arrive. If in doubt, just consider the 255%
growth in contactless payments experienced
in 2015.
We receive numerous requests to help
merchants who have seen the success of the
early adopters, such as John Lewis.
Many retailers have developed their different
sales channels in silos, finding one payment
partner who can deliver well for e-commerce,
another for telephone/mail-order and a further
one for face-to-face. Today’s savvy consumer
expects a seamless experience that systems
incompatibility mitigates against.
We would urge that payment solutions are
actively included in planning any IT project at
the earliest stage to achieve a cost effective
omni-channel offering.
Pricing Regulation SEPA Omni-Channel
A key element of card payment suppliers’ costs,
Interchange, reduced significantly for credit and
many debit cards in 2015. Left unchallenged,
we are seeing acquirers increase their profit
margins whilst apparently decreasing their
charges:
1. Some have introduced charges for non-secure
transactions (which they keep) to ‘encourage
merchants to follow security processes’ as
the interchange incentives for doing so have
largely been removed.
2. Data security fees etc. have spread,
justified as passing on the cost of supporting
merchants in achieving and maintaining PCI
compliance.
3. The full benefits of personal card
interchange costs are not being passed
on in pricing reviews.
4. Caps on debit card charges are not being
consistently and correctly applied.
We are seeing real benefits for clients when we
negotiate to improve proposals made. Care and
attention to detail are needed to ensure that an
improvement in headline rates really does feed
through to the bottom line.
   
*Visa debit cost changes – from September ‘16 the Interchange on UK Visa debit will reduce to 0.2%, but the 50p per
transaction cap will be removed. For transactions under approx. £245 this will reduce supplier costs, but higher value
transactions could see costs soar (e.g. the cost of an insurance premiums of £500 would double). Payments suppliers are
considering how to respond - we anticipate further margin growth.
STOP PRESS

A clear understanding of both the current
situation and the end objective underpins
any effective payments strategy. From this
a payments roadmap can be developed.
Summary
2016/17 provides major opportunities for
companies to reduce costs and drive revenue
by smarter use of payments solutions.
There are pitfalls to avoid as suppliers have
shown that they are naturally protecting their
interests and taking the opportunity provided by
market turbulence to improve margins.
1. Identify
Identify stakeholders
in the business who
are impacted by
payments solutions
and capabilities.
Payments should not
be left to the finance
team to manage. It
underpins and links
many strategies, such
as marketing, sales
and operations.
Typically stakeholders
are drawn from IT,
Sales, Operations,
Marketing and
Finance.
2. Workshop
Workshop each
stakeholder presenting
their plans and, as a
team, consider what
payment solutions are
in place, and what is
needed or available to
facilitate the plans’
delivery.
In our experience
this session justifies
the whole process by
itself, as functions
start to see how they
can work together
more effectively and
feed off each other’s
ideas.
5. Budget
Consider the
budgetary needs for
delivery (remember
to take account of
the expected sales
uplift generated
by the improved
solutions).
Consider whether
there is potential
to release some or
all of this budget
from within existing
spending.
6. Draw up
Draw up the agreed
Payments Strategy
and roadmap,
allocating roles and
responsibilities for
delivery.
3. Agree
Agree common goals
and identify the steps
needed to achieve
them.
4. Assess
Assess the capabilities
held in-house for
delivering these steps
and where further
research or external
expertise is necessary.
ERA stands ready to be your specialist partner
of choice. We have already guided substantial
companies in achieving a robust Payments
Strategy to deliver to their bottom line.
Steps to benefit from the changing payments environment
Banking & Payments by the Payments Team

The UK Facilities Management Sector –
A £111 Billion a Year Economy
Facilities Management by Alan Oldham
A recent article published by the British
Institute of Facilities Management described
the FM sector as a barometer of the economy.
The FM sector employs around 10% of the
UK’s working population and is estimated to
be worth £111 billion a year to the economy,
which is why it’s a barometer of business
performance as a whole.
The BIFM’s business confidence monitor
last month released figures that 64% of UK
professionals from the sector describe the
business environment as ‘positive’ or ‘very
positive’. The FM Business Confidence Monitor
2016 research was created from a survey of
professionals from senior decision-makers to
teams on the ground delivering services.
However, the impact of the National Minimum
Wage (NMW) and the imminent apprenticeship
levy present challenges to the Facilities
Management sector in terms of profitability.
But this in turn presents opportunities to
look at other ways to deliver efficiencies
via productivity, innovation and contract
management solutions for their clients.
ERA have the capabilities to address these
impacts on behalf of our clients via our team
of Facilities Management Project Specialists.
ERA’s Facilities Management offers:
• Contract Review – Clients often enter into
contracts prepared by the contractor, which
are often heavily weighted in favour of
the contractor carrying out the work with
little or no protection in the event of non-
compliance. The ERA Facilities Management
Team have years of experience in dealing
with these issues and are able to identify and
renegotiate unfair contract clauses prior to
contract award.
• Contract Management – ERA has the
capability to manage FM contracts on behalf
of the client, providing ongoing services
to manage supplier costs and performance
criteria in line with the contract.
• Resource Review – ERA has the experience
and skillsets to understand the clients FM
needs, taking into consideration operational
requirements, the wellbeing of the clients
customers and stakeholders alike in order to
deliver effective solutions.
• Contractor Selection – ERA assesses the
delivery and commercial capabilities of each
contractor and marry these to the exact
need of the client, more often than not
exceeding clients expectations over the term
of engagement.
• Innovation – The ERA FM team understands
that innovative ideas and operational
efficiencies are intrinsic to delivering
successful FM solutions, ERA frequently works
with suppliers to investigate new market
innovations and present them as alternative
solutions, more than often generating even
greater cost efficiencies for clients.
In essence our capabilities and experience
give ERA the competitive edge in providing
progressive solutions in the Facilities
Management sector.

Managing supplier relationships (SRM) remains a key skill
by David Brassington
It seems nothing changes while everything
stays the same in Professional Procurement.
While looking at a recent article in Supply
Management I noticed again an emphasis on
insightful and professional management in
modern supplier relationships.
So it should always have been.
More than a year ago, I read comments by Roger
Davies (Group Head of Procurement at Marks
& Spencer) in Supply Management. He had
been responding to a (ProcureCon) survey that
relationship management and influencing skills
were core to the Procurement role.
Expense Reduction Analysts, as professional
procurement specialists, see the challenges of
effectively managing relationships on a daily
basis. We sit alongside our clients as an expert
resource in the Supply Chain. We see the
considerable benefits for our clients in ‘getting
it right’. This is integral to our culture and our
working ethos and always has been.
A few reasons why:
• Trust and honesty yield benefits: the
‘Managed Partnership Process’.
• Recognition of supply and supplier
vulnerability reduces risk.
• Aligned relationships can deliver innovation,
quality and price improvements.
• Improvements in ‘time to market’ through
open relationships.
Recent reporting also suggests that the car
industry could “face losing out on major
benefits which better supplier relations
would bring”. (Supply Management)
ERA’s specialist teams of Supplier Management
Consultants enable our clients to enjoy
sustainable, mutually beneficial Supplier
Relationships that deliver value across a wide
range of spending areas.
Constantly in actively managed dialogue with
thousands of suppliers at any one time, we look
after hundreds of millions of pounds’ worth
of client expenditure. ERA delivers long term
benefit across a wide range of cost categories.
“In my experience procurement people can at times wait for
opportunities to come to them rather than selling and pushing what
they can offer, or encouraging people to pull on what they do.”
WWW.EXPENSE-REDUCTION.CO.UK 11

Adare Group acquires Banner Managed Communication -
How will this affect their clients?
Office Supplies by Keith Copestake
Global marketing services and secure
& essential communications provider,
Adare Group has bought Banner Managed
Communication (BMC), a leading supplier
of business marketing and essential
communication services.
Adare Group chief executive Robert Whiteside
said the deal was “a truly transformational
acquisition” which will boost Adare’s UK
operations and give BMC better access to
overseas territories, as well as be a significant
step forward in Adare’s ambition to become
a £400m-turnover company by 2020. More
acquisitions are planned.
“This acquisition is a hugely positive
development for both companies’ clients,
staff and investors. With our combined service
propositions, high-quality client portfolios and
talented teams we have the opportunity to build
one of the world’s foremost marketing services
businesses. As well as doubling the overall size
of our UK business, the deal takes our secure
and essential communications operation to
the next level by bringing together Adare SEC
and Banner Direct, creating a £70m, 400+ staff
operation. The new organisation will have the
scale and infrastructure to be able to service
the very biggest and best UK businesses and
global brands.”
Whiteside said: “It puts Adare at the forefront
of our markets, it differentiates us even
further by our scale and by a wider range of
complementary services and by an enriched
customer base”.
The combined business will enjoy an especially
strong position in the global leisure, healthcare,
FMCG, financial services and retail sectors. BMC
operates through four divisions – Banner Create,
Banner Direct, Banner Connect and Banner
Tech. In the short term, the BMC operations
will remain a separate entity, or as Whiteside
put it, “a third child in the company” alongside
Adare International and Adare SEC, which are
individual limited companies. Eventually the
BMC operations will be split up based on their
respective specialties.
BMC chief executive Catherine Burke said:
“The combined organisation will open up a
range of new benefits to our clients and other
stakeholders beyond anything we could deliver
as stand-alone businesses. A greatly-expanded
global infrastructure is one obvious example,
as are our much-enhanced offerings in business-
critical essential communication services,
multichannel, digital visual communications,
creative design, print management and
countless other areas. In terms of sector
strengths, the two businesses complement
one another particularly well, while in certain
verticals, the deal makes us the single biggest
provider of integrated marketing services”.
Keeping clients first in merger integration
The period of time following on from acquisition
is often perceived by competitors as a time
when the merged businesses can be at their
weakest due to the complexity of redefining
the service offer, potentially providing an
opportunity to target their customers.
During the transition period when the two
companies are aligning their operations and
forming a new strategy, possibly a restructure
resulting in a new leadership team and new
account manager, is a time when the customer
can suffer due to lack of focus from the
service provider.
In some cases the customer may feel unsure
about the future, concerned about service level
and service quality, particularly relevant if they
have previously enjoyed a good experience.
Customers who may feel exposed to the
company experience are far more likely to listen
to a competitor with the possibility of changing
suppliers. Competitors will arm themselves
with as many tools (failed back office system
integration is one example) as they can,
to increase their chances of convincing the
customer to switch their business.
Internally the companies may be weakened
by the integration, with the threat of an
organisational restructure, employees feel
stressed and naturally worry about the fate
of their jobs.
When companies merge, they embark on
seemingly minor changes that can make a big
difference to customers, causing even the most
loyal to re-evaluate their relationship with the
company. Integration decisions come with an
inherent trade-off: if you are making changes
in your operations, particularly changes that
benefit your bottom line at the expense of
your customers, you can expect to pay a price
in the top line. Companies tend to focus on
quickly reducing costs and worry mostly about
the biggest things that can go wrong, such
as major technology disasters, rather than
long-term customer attrition. Despite their
low expectations of merged companies, the
reality is that customers demand consistent and
seamless services across both merged companies
from the start. If they don’t get them, they
defect. Companies that do the best job of
retaining customers (and attracting new ones)
adopt the customer’s view of the merger, as
they make important integration decisions.
Adopting the customer’s point of view does not
change the fundamental activities required in
merger integration. Instead, it allows companies
to sequence and coordinate customer-facing
changes in ways that create a better
customer experience.
There are three key initiatives that can
improve customer retention in a merger:
1. Customer experience.
2. Communication external and internal.
3. Empower employees.
Mergers aren’t easy, and they raise real risks
that customers may exit. The merger integration
process brings with it a natural opportunity
to re-evaluate and even improve the overall
customer experience.
It will be interesting to see the effect this
merger has on BMC clients that purchase both
print and stationery from Banner. Will it prove
to be a good opportunity for these clients to
review the market?
“Over the next two to three
months, it’s about getting out
there to the customers and
getting them comfortable.”
When companies merge, they embark on seemingly minor changes
that can make a big difference to customers, causing even the most
loyal to re-evaluate their relationship with the company.
Acknowledgements:
PrintWeek Laura Miles, Bain & Company, Mergers & Acquisitions
Ted Rouse, Bain & Company, Global Mergers & Acquisitions

Electricity users face higher non-energy costs
Utilities by Richard Clayton
Successive UK Governments have taken a
variety of steps to encourage a move towards
a greater market share for renewable energy
and thus to a lower carbon economy. Support
for renewable electricity has been funded
through electricity bills and the amount of
this funding is controlled through the Levy
Control Framework, essentially a budget
agreed between the Department for Energy
and Climate Change and the Treasury.
The LCF budget is estimated to move from
£3.2bn in 2013-2014 to £7.6bn by 2020-2021 and
there is a provision for a 20% contingency for
cost overruns in any one year.
The LCF covers the cost of three schemes:
The Capacity Market (CM) scheme which
has been established to ensure that peak
electricity demand requirements can be met is
also included in the LCF, but is not subject to
the £7.6bn budget. CM costs will be borne by
consumers using electricity in the peak hours
of 4 pm to 7pm Monday to Friday during the
months of November to February (i.e. not across
all electricity demand) and have been designed
to incentivise consumers to avoid peak period
usage (rather like the way the triad system is
used to calculate transmission charges for half
hourly metered customers).
All costs from schemes covered by the Levy
Control Framework are levied on suppliers and
it is expected that these will then be passed
through to consumers in their electricity bills.
Whilst there is a plethora of variables and
sensitivities which may impact on the precise
outcomes, energy market consultants Cornwall
Energy have gathered evidence to support that
on a p/kWh basis LCF costs alone will account
for an increase of 124% from a base of 1.51 p/
kWh in 2015-2016 to 3.38 p/kWh p/kWh in
2020-2021.
Taking LCF costs alongside other pass through
charges including the major network charges
for distribution and transmission a picture
emerges of non energycosts accounting for
between 50 to 60% of the total electricity bill to
consumers; and this in a period when wholesale
(commodity) costs have crashed.
Traditionally the main focus for buyers has been
on energy market volatility when contemplating
new energy contracts however the rising
trajectory of LCF and other pass through costs
imply an increasing importance on ensuring
clarity on contract terms. In particular, whether
agreed prices are ‘fixed’, ‘all inclusive’ or ‘pass
through’ and a clear understanding of what
changing conditions may prevail which would
allow a supplier to pass on increase costs.
Suppliers are faced with a considerable
commercial risk in making estimates for LCF
costs especially for contracts spanning a number
of years. CfD FiTs and microgeneration FiTs vary
on a quarterly basis whilst the costs for RO and
CM are levied annually. It is therefore highly
likely that suppliers will include a risk premium
for fully fixed contracts. It’s much easier from a
supplier’s perspective to offer a ‘pass through’
contract but this then transfers the risk and
difficulty for annual budgeting to the consumer.
In all cases, it is of paramount importance
that the consumer has an understanding of the
changing dynamics of the wholesale energy
market and the ever-increasing non commodity
elements which make up the whole energy bill.
The Renewables Obligation (RO) which is the tradeable green
certificate scheme supporting large scale renewables projects
between 2002 and 2017.
The microgeneration feed-in-tariff scheme (FiT) which supports
smaller scale renewable investments for periods of up to 20
years. This scheme started in 2010.
The contracts for difference feed-in-tariff (CfD FiT) which will
gradually replace the RO and will support all new large scale
renewables for 15 years.
1.
2.
3.
The LCF budget is estimated to move from
£3.2bn in 2013-2014 to £7.6bn by 2020-2021
and there is a provision for a 20% contingency
for cost overruns in any one year.

Secondary Packaging
Packaging by the Packaging Team
Secondary Packaging, typically the ubiquitous
brown corrugated box, can be regarded as
a necessary evil – you need to protect items
during storage and in transit, but it adds
little value to your product. So it is critical to
ensure that the boxes that you do use meet
your requirements, while adding as little cost
as possible.
Corrugated cartons seem like straight forward
items to specify and purchase, but in practice
there are various
ways in which you
can ensure that the
product you are
buying is best suited
for your purpose.
If you are buying large
volumes of a limited
range of sizes then
make sure the design
of the box is optimal.
Some suppliers have
access to box design
software, and given
the specifics of box
size, weight when full
and how you stack and
load boxes, they can
ensure that the box
material weight is suitable. Given new types
and weights of paper used in box manufacture,
there may be an opportunity to re-specify the
board grades and reduce cost, while providing
the required level of protection to the
box contents.
If your requirements are for smaller volumes
of a larger range of boxes, then make sure that
you order the optimum volume to get the best
price, but without ending up with a warehouse
full of unused boxes. We’ve all seen warehouses
full of old, dusty, redundant piles of corrugated
boxes! Depending on your supplier’s capabilities,
they may be able to hold stock for call off, and
at least this would enable you to reduce the
volume of boxes held in your warehouse.
A new solution that is now becoming more
popular is to produce boxes onsite to meet
your specific requirements. By doing this you
remove the requirement to hold stocks of many
different box sizes, and you are able to produce
boxes that meet your
exact requirements.
There are operational
and environmental
benefits in using this
type of solution. By
producing a box that
meets your specific
needs you no longer
have to select the
‘next size up’. This
can reduce logistics
costs and also
minimises the amount
of void fill required.
By reducing the
amount of packaging
required overall,
you minimise the
environmental impact
and also reduce the frustration that we’ve all
felt on opening a box to find it half full
of ‘popcorn’.
However, when considering this sort of solution,
it’s important to quantify all elements of the
solution, so that you understand the overall
cost of capital equipment, stock requirements,
logistics, etc. This is where Expense Reduction
Analysts can help you. By using our knowledge
and experience of different packaging solutions
we can help to identify the most cost-effective
ways to meet your operational requirements.
WWW.EXPENSE-REDUCTION.CO.UK

ERA - Market intelligence - June 2016

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ERA - Market intelligence - June 2016