Failing to ensure you choose the correct carrier for your business can cost you in the long run. If you are not careful you could end up with disgruntled customers if the service level you promised is broken as a result of your carrier.

Examples of mismatched service delivery are common, recently Expense Reduction Analysts were discussing with a client the pitfalls of choosing an incorrect courier service.

• The organisation in question purchased a range of products from an online retailer to be delivered to a residential address because of the amount of products being purchased was cheaper than purchasing in a local store.

• No delivery time slot was given when purchased and as a result no-one was in to sign for it, resulting in a failed delivery. A call was made to the customer services team to reschedule a delivery second delivery slot.

• No second delivery attempt was made, resulting in the organisation having to collect from the parcel depot direct (a 54 mile round trip), now costing more than purchasing in the local store.

• Some of the products had to be returned for as they were incorrect, but no one arrived to pick it up.

The biggest cost, however, was to the online retailer as the organisation realised that the local store was actually cheaper, when factoring in the additional cost of the carrier’s failure.

The online retailer lost out on repeat business and also a recommendation. This additional cost and loss of future business could have been prevented by choosing the right carrier for their business model.

Here are some cost saving tips you can use to ensure your consumers are given the correct level of service:

• Communicating the delivery and any issues with your customer is key

• Choose the right carrier with the right infrastructure for residential deliveries

• Choose a carrier with a simple reverse logistics (returns) function

• Choose a carrier who has the right tariff structure for residential deliveries

• Ecommerce invites more sales overseas, so make sure you have a robust international shipping option

Ecommerce logistics is a rapidly evolving arena and failing to select the right carrier can create unnecessary cost and unhappy consumers.

INSIDE THIS ISSUESweet Medicine Find out how the National Pharmacy Association saved over £500k

Managing risk within projectsSue Cooke explains how to assess risk and how to manage it effectively

Great save – Aston Villa’s overheads kicked into touchThe fi nancial pressure faced by

clubs today is no less intense in the heady reaches of the

Premier League where football has become big business. While Aston Villa regularly fi lls its 42,788-capacity stadium at Villa Park, Mark Fairbrother, the club’s head of fi nance, was keen to get a better understanding of how to manage expenditure.

Mark explains: “We run a number of income generating operations here that go far beyond our match day activity. As well as our ticket offi ce, shop, community and media teams, we have a hospitality and events department that handles corporate sales and partnerships, catering on match days, non match day conferences and events and operating our onsite pub. Each department operates independently and has quite different requirements of its suppliers.”

“Expense Reduction Analysts have been very impressive. Not only have they saved us a signifi cant amount of money, but they have also ensured that other vital factors – such as standards of service and our Corporate Social Responsibility – were kept clearly in mind when recommending changes.”

Aston Villa enlisted the help of cost, purchase and supply management consultancy Expense Reduction Analysts to carry out a thorough review of the club’s cost base and identify where real savings could be made.

The review began with a look at waste and recycling operations, where savings of £40,000 were identifi ed (against a spend of £99,000) through a change of supplier.

Are your communications all tied up?Discover how to avoid the costs of rollover contracts

Are your Business Rates increasing? Expert Paul Giness explains why

PROFIT NEWS

“I am delighted with what Expense Reduction Analysts have achieved to date. Testament to this is the fact that I have asked Steve and the team to analyse other cost categories, including an energy effi ciency review, which aims to identify simple changes that the club can make to save energy. I look forward to a long and successful relationship between our two businesses.”Mark Fairbrother, Head of Finance

Along with the savings, it was vital that the standard of service was maintained, as, for example, a missed collection on Saturday would spell chaos for an upcoming mid-week fi xture. In fact, the review resulted in other benefi ts, including staff spending less time moving waste and less waste being stored at the stadium.

With a maximum capacity of over 42,000 visitors for each match at Villa Park, providing catering facilities and cleaning up afterwards is vital. Expert consultant Hartley Jenkinson was brought in to review Catering Consumables and Janitorial Supplies and was able to deliver savings of over 28%.

Hartley comments; “Aston Villa have exacting standards for services provided to their loyal fans, as well as a commitment to the environment by ensuring as many products as possible

EXPENSE REDUCTION ANALYSTS SUCCESS STORY

are bio-degradable. This was included in the brief given by Expense Reduction Analysts to Suppliers as part of the review.”

Hitting the post - savings on mail

The review also focused on postage and quickly identifi ed more cost-effective processes. The club now outsources general posting, saving money on both the postage itself and the cost of maintaining a franking machine. Tickets are now mailed in pre-printed envelopes, allowing the club to continue to use fi rst-class post, but at a lower cost.

As well as identifying savings and maintaining or enhancing standards of service, Expense Reduction Analysts’ reviews also keep an eye on the bigger picture, considering factors such as a business’s Corporate Social Responsibility. Steve Marshall, Expense Reduction Analysts consultant, explains: “Villa’s CSR policy is key to all of its business commitments and supplier relationships.

“This policy was particularly important when looking at the club’s waste and recycling arrangements, as the incumbent supplier had been recycling more than 80 per cent of waste. Any potential new supplier had to achieve at least the same.

“At Expense Reduction Analysts, we see it as our job, not only to reduce costs, but also to maintain or enhance service. We work to understand our clients and recognise what is important to them. With Aston Villa, the key considerations were CSR, savings, standards and, with their variable match-day schedule, fl exibility of service from their suppliers.”

EXPERT NEWS - SIMON PERKINS

The Cost of Not Delivering Your Promises

EXPERT NEWS - THE COMMS TEAM

How much of your day do you spend fi re fi ghting – dealing with those unexpected problems that

arise out of nowhere and always appear serious at fi rst glance?

If you think about that some more, then you can see a common thread behind spending all that time is risk and, therefore, how to manage that risk. This is particularly important within supply chain management when items purchased can quite often be business critical.

An article in the Supply Management magazine mentioned risk management and highlighted the failure within organisations to manage risk properly:“The great thing about not managing risks is that project failure comes as a complete surprise, rather than being preceded by a long period of worry and depression”.

So how can organisations manage risk affectively to reduce the number of ‘fi res’? You can never eliminate them completely

but you can minimise them through effective risk management.

Professional project risk management is all about diligent research and homework, and should draw on input from as many colleagues as possible. That homework should include:

1. Identifying all the potential risks that could impact on your project, which is where you need the input of other areas within the business to identify all the possible risks. It is often those people at ground level, on the shop or factory fl oor that have the best understanding of the real risk. Proper documentation of these will identify business critical risks before they materialise.

2. Assessing each risk identifi ed in terms of its level of impact. In other words, if the risks identifi ed were to happen, then how much disruption would they cause? Yes, this can be a subjective exercise but it is important to grade each risk, to provide a

measure of its impact on the business.

3. How likely is each risk to occur? This is meant to be a separate exercise from the point above, leading to two grades being assigned to each risk. Ultimately you end up with a list of potential risks that vary between ‘very high impact’ and ‘very high likelihood’ which represent a serious concern, to ‘very low impact’ and ‘very low likelihood’, i.e., not really worth worrying about.

4. Deciding on a course of action for each risk identifi ed. This is arguably the most crucial step in managing risk. There’s not much point going through the above steps and identifying all the potential risks if you don’t put in a plan of action of how to deal with one should it occur. This is akin to contingency planning.

Research and planning in this way won’t stop the need to fi re fi ght but at least when the fi re starts you should already know how to fi ght it.

Automatically renewable contracts that tie companies with landlines (to repeated minimum contract

periods) unless they opt-out are to be banned under proposals being considered by Ofcom.

These contracts known as rollover/evergreen contracts, are currently offered by a number of telephone companies, including the UK’s Largest supplier; BT. The contracts automatically roll forward to a new minimum contract period - with penalties for leaving - unless the business actively opts out of the renewal at the most appropriate time (usually within a small time frame).

Ofcom estimates that approximately 15% of businesses are on rollover contracts, with most unaware of the actual contractual terms they are committing to. Furthermore, rollover contracts can make it very diffi cult to switch providers whilst avoiding “early termination charges”, which can be unexpectedly high. For the market generally,

it means less competition as it is harder for competing providers to attract customers on rollover contracts and therefore their ability and incentive to create lower cost and higher quality services is reduced.

If Ofcom proceeds with its proposals, providers who continue to offer this type of contract could face enforcement action including a fi nancial penalty of up to ten per cent of turnover.

However this proposal is only to be applied to Residential users and businesses with fewer than 10 employees, which still leaves most businesses exposed to “roll-overs”.

Expense Reduction Analysts are very experienced in this area and can ensure that their clients fully understand their commitments and we can manage the contracts “headache”, minimising/eliminating early termination charges and maximising savings opportunities. Contact your Communications Team member to discuss your requirements in greater detail.

Are your Communications all tied up?

EXPERT NEWS - SUE COOKE

Managing risk within projectsEXPERT NEWS - STEVE WHITLAM

Cut card acceptance costs simply

Having seen Chip & Pin widely accepted by cardholders and retailers for face-to-face

transactions, the card industry has turned its attention to cutting identity fraud where the retailer and cardholder don’t meet.

And after a few years of a softly-softly “carrot” approach, the “stick” has appeared in terms of increased – and avoidable – transaction costs and penalties where businesses do not comply with the common standards for cardholder not present (CNP) transactions through mail-order, by telephone or via the internet.

It is very unusual for us to fi nd that retailers are not now capturing the 3-digit signature strip code in all CNP transactions, but it is common to fi nd a belief that it is adequate for web transactions. While it is a useful tool for reducing the potential for fraud when transactions are through the internet, cost savings fl ow from 3D Secure being in place. (3D Secure is the catch-all name

for systems such as Verifi ed by Visa or Mastercard Secure Code).

Even where 3D Secure is available, it is often not functioning and penalties run on average at 0.5% of credit card transaction values and 10p per debit card transaction. Every single penny of that penalty is avoidable.

The other primary area of avoidable costs is to ensure that cardholder data is handled in compliance with Payment Card Industry Data Security Standards (PCI-DSS), and, when systems are compliant, to ensure that the merchant acquirer is aware. Penalties can be as high as 0.85% of all transaction values and the solution can be as easy as fi lling in a form for smaller retailers with only face-to-face transactions. It is more complex for larger retailers and those who transact through mail-order, telephone or the internet but I believe that it will not be long before the non-compliant have their ability to accept card payments revoked.

The National Pharmacy Association (NPA) is the representative body for the community pharmacy trade

in the UK and, in addition to supplying a range of ancillary pharmacy support products at competitive prices, it seeks to support its members by infl uencing government policy and consumer opinion. It is also a leading provider of indemnity insurance and legal advice for community pharmacies.

The NPA wanted to ensure that it was achieving value for money across all areas of the business. Adrian Palmer, Director of Finance and Commerce at NPA, decided to call in Expense Reduction Analysts to undertake this wide-ranging review.

David Keating, the client relationship manager for the NPA, takes up the story: “Adrian asked us to conduct the review of many areas of expenditure simultaneouslyand to phase implementation, if complexity or supplier change dictated, over a longer period. We agreed an overall target of just below £300,000 of savings with no reduction in quality or service levels.

We were able to form a bespoke team of analysts – all specialists in the industries that we were engaged to review – to perform the work in each area

An objective and informed view of the expenditure being made

“At Expense Reduction Analysts, as part of our supplier management process, we work closely with the incumbents to determine if they are providing value for money and if there are opportunities for them to develop their solutions to the benefi t of our client. And that is what we have achieved with the NPA in many cases. There have been limited changes to the suppliers, and we are continuing to work with them on an ongoing basis to ensure that the enhanced value – as well as the quality of product and the service provision – is maintained and enhanced over time.

“We judge supplier performance through the purchase data from invoices, in conjunction with stakeholder interviews to determine the required quality and service levels. This allows an objective

Sweet medicine: NPA’s procurement now in glowing health

1 April 2011- Land fi ll Tax to increase again.How does this affect me?

EXPERT NEWS - GLENN COTTER

The cost of waste disposal is increasing at a rate above infl ation and is set to rise further

during 2011. Price increase notices will be dropping through letterboxes over the next few weeks, triggered by higher Landfi ll Tax and gate fees from 1 April.

The Government’s annual landfi ll tax ‘escalator’ brings an £8 per tonne (16.7%) rise this year and similar increases are scheduled each year until at least 2014. To compound the issue further, landfi ll capacity

is reducing and this scarcity is allowing operators to increase their own gate fees too.

What can be done?

The good news is that, for many organisations, the effect of these cost increases can be mitigated or even reversed. Demand for recyclable materials has been improving steadily and has returned to levels not seen since 2008. As a result, it has now become commercially viable to divert a high

proportion of waste away from landfi ll, providing the correct procedures are employed at the source of production.

What can Expense Reduction Analysts do to help?

Expense Reduction Analysts regularly monitors the marketplace for waste services and recyclable material and has reviewed the waste management arrangements of a wide range of organisations. We are therefore well

placed to conduct a thorough assessment of your waste streams to identify hidden value and reduce costs. Typically for waste we are achieving an average saving of 30%

What about the service levels?

As with any projects Expense Reduction Analysts undertakes, our thorough ongoing audits ensure service levels are maintained and, in the vast majority of cases, improved. Additionally, we

identify and recover any incorrect charges and deal with any issues that may arise. Our aim is to ensure our clients benefi t fi nancially and we also help them become more environmentally aware and increase their recycling levels wherever possible.

Our strong presence in the marketplace enables us to achieve and maintain results that organisations on their own just cannot match.

EXPENSE REDUCTION ANALYSTS SUCCESS STORY

Category Saving(£) Saving(%)

Gas £1,043 13%Offi ce Supplies £13,128 30%Fixed Communications £4,179 20%Mobile Communications £1,285 14%Contract Cleaning £3,849 14%Merchant Card Fees £7,883 17%Electricity £2,607 13%Copiers £4,611 59%Postage £21,400 16%Catalogue Print £60,789 30%Marketing Print £44,300 41%Training Print £94,243 36%Various Rebates £100,000Sales, Warehousing & Distribution £209,309 32%IT – Data centre £15,851 29%

Total Savings £584,477 36%

Table of Savings

“The results of the programme of work undertaken by Expense Reduction Analysts have been outstanding. We agreed a target of £300,000 total savings, a substantial target. However, following development of the scope and excellent tender results we have nearly doubled it.”Adrian Palmer, Director of Finance and Commerce, NPA

and informed view of the expenditure being made, and the quality and service levels thereby procured. In fact, in three or four categories, we concluded that the NPA were already achieving best value – so they received the peace of mind of a positive outcome from this independent audit. In some categories, though, we found that a new approach was warranted: in Copiers, for instance, we recommended restructuring the contract, which led to a 59% saving.

“In fact, we completed the programme of work in six months, implementing these projects to a schedule that allowed the NPA to accommodate the changes smoothly into their workfl ow. This has also allowed the NPA to consolidate their supply base, thereby achieving further economies as a result.

“We see the successful completion of these projects as the fi rst step in a long term partnership with the NPA, who have now engaged us on a number of other areas of their business. We take this as a compliment to our work so far and look forward to working with the NPA in the coming months and years.”

How would Adrian Palmer sum up the benefi ts of Expense Reduction Analysts’ work?

“The results of the programme of work undertaken by Expense Reduction Analysts have been outstanding. We agreed a target of £300,000 total savings, a substantial target. However, following development of the scope and excellent tender results we have nearly doubled it, and we are able to see the savings being delivered through the ongoing supply auditing process. We would not have been able to complete such a review ourselves within these timescales. Expense Reduction Analysts have become an integral part of our commercial team and have worked constructively and fairly with our suppliers. And, at the end of the day, I have the peace of mind that procurement is scrutinised and controlled.”

Following on from the success of the Cost Reduction Guides throughout 2010, Expense

Reduction Guides are proud to announce the fi rst of the Business Fitness Guides, with the fi rst guide focusing on effective cost management strategies in the Retail and Wholesale sector.

Between 2000 and 2008, retail sales grew year on year by around 4% with half of all spending being classed as ‘indulgence’ purchases. During a downturn, this is the most vulnerable area for retailers, as consumers revist their budgets and revise their luxury, non-essential spending.

Most retailers have revisited their business strategy to cope with the online marketplace, as well as the economic

The new rates bills are out now from Local Authorities for 2011/12 and it could be a good time to

remind businesses to get a review done. With infl ation currently running high and rates bills tracking infl ation, many have increased by a minimum of 4.5% this year, and some by much more.

Here are a few frequently asked questions to help you.

My bill has increased signifi cantly for 2011/12 – why is this?Your rates bill is calculated by reference to a Rateable Value multiplied by a Business Rates Multiplier (described below). This Multiplier is based on infl ation, which is currently running quite high and for the coming 2011/12 rates year, is set at 4.6%. Therefore, for many businesses, their rates will increase.

Furthermore, if your property is subject to transition due to a large increase in your rateable value following the national revaluation last year, you may have an additional increase being phased in.

How has my Rateable Value been worked out?National revaluations occur every 5 years with current valuations effective from 1st April 2010. Your Rateable Value is based on what the Valuation Offi ce calculates your property would rent for hypothetically in the open market in April 2008. As this is just before the full impact of the credit crunch, there are wide percentage differences between assessments.

EXPENSE REDUCTION ANALYSTS SUCCESS STORY

EXPERT NEWS - PAUL GINESS BSc (HONS) MRICS

Business Rates 2011/12

Mono Pumps offer a wide range of progressing cavity pumps, grinders, screens and pump

systems for a variety of industries, including water and wastewater, paper and pulp, chemical and pharmaceutical, food and beverage, mining and mineral processing, solar and agricultural and oilfi eld industry solutions. Based in Audenshaw, Manchester, Mono, a division of NOV, celebrated 75 years of existence in 2010.

Mono Pumps were originally reluctant to engage with Expense Reduction Analysts. Steve Valentine, Group Financial Director, takes up the story: “I fi rst met Adam Wheatley of Expense Reduction Analysts late in 2003. Up to that point, Adam and his colleagues had been trying to gain a meeting with me for some years, but like many others I was sceptical that a cost consultancy really could come in and deliver savings, given the effort we put in to our own purchasing.

“We have always believed that we are able to achieve the best results for ourselves and regarded Expense Reduction Analysts’ claims with some scepticism. But the results speak for themselves and I wholeheartedly recommend Expense Reduction Analysts to any organisation that wishes to reduce its costs and urge them to put aside the scepticism that held us back.”

“Even though Adam overcame my scepticism when we met, I still harboured doubts, particularly about the effort required from us, but his persistence eventually paid off and we launched our fi rst projects – Stationery and Landlines – in October 2004.”

Mono Pumps were very impressed by the results achieved on those initial projects, in particular for Stationery where a 43% saving was delivered by changing supplier.The change went very smoothly and they are still using the stationery supplier introduced by Expense Reduction Analysts. Furthermore, Steve Valentine soon realised that the internal energy required to support the cost reduction projects was not signifi cant. In consequence, he asked Adam Wheatley to meet with two production colleagues to look into possible projects within their areas. The result was the Courier project, which delivered signifi cant savings via the incumbent supplier.

“I was blown away... ...a 28% increase over all that I had done”

Such success resulted in the remit being widened still further into Scrap – a key concern for Mono Pumps. Barrie Walker, Supply Manufacturing Team Leader at Mono Pumps, explains: “Expense Reduction Analysts were recommended to me by my transport colleagues following the excellent work they had undertaken on

Courier. I am very proactive with regard to our Waste and Scrap needs and in fact had already delivered considerable benefi ts for Mono Pumps in these areas. Having done everything that I could, I decided to let the Expense Reduction Analysts team see whether they could yield additional benefi ts for Scrap.

“Diane Lane and Bob Carter impressed me from the start with their efforts to understand our requirements. Then I was blown away by what they achieved with a further 28% increase in revenue over and above all that I had already done. This was achieved with the incumbent supplier, so delivering the benefi ts involved little effort from me.

“They also tied the price for Scrap to an industry index, with the result that we gain the immediate benefi t of any increase in market value. The benefi ts quoted do not include this example of the value that they add, and, with markets rising, this is probably worth as much again.

“I have already committed to a further three year term”

“I have recommended Expense Reduction Analysts to all of my peers and superiors in production and beyond and a variety of new projects should be launched soon. I have myself asked them to now look at our Waste costs. Furthermore, I am so pleased

COST REDUCTION GUIDE

Business fi tness guide released

with the service they provide on Scrap that even though we are only ten months in, I have already committed to a further three year term, so as to retain access to Diane and Bob’s services.”

Adam Wheatley concludes from Expense Reduction Analysts’ point of view: “Compared to most clients, it has taken us a long time to reach signifi cant savings forMono Pumps. That journey has, however, allowed us to grow some strong working relationships and establish a high level of credibility given our track record to date. The scene is now set for us to do much more for Mono Pumps, with three further

projects now being launched, and we look forward to the opportunities ahead.”

Steve Valentine summarises the value of the projects to date: “Expense Reduction Analysts have so far delivered annual benefi ts of £120,700 for us, with lots more to go at. Like many companies, we have always believed that we are able to achieve the best results for ourselves and regarded Expense Reduction Analysts’ claims with some scepticism. But the results speak for themselves and I wholeheartedly recommend them to any organisation that wishes to reduce its costs and urge them to put aside the scepticism that held us back.”

How does my Rateable Value relate to my actual bill?At its most basic level, the Local Authority multiplies your Rateable Value by the annual Business Rates Multiplier. The Multiplier is set by Central Government and is 43.3p for 2011/2012 and for those qualifying for Small Business Rate Relief, the Multiplier of 42.6p.

However, many rates bills also feature transitional arrangements, which phase in large shifts in payments, whether upwards or downwards.

How do I know if I am receiving Small Business Rate Relief on my bill?Currently qualifying businesses with a Rateable Value under £6,000 pay zero rates until 30th September 2011. Between £6,000 and £12,000 there is a reducing scale proportionate to the size of rating assessment and they have their Business Rates calculated using the lower Multiplier of 42.6p.

Businesses with a Rateable Value between £12,000 and £18,000 do not receive a discount but still have their bill calculated using the lower Multiplier of 42.6p.

My property has been empty for a while, and last year I didn’t have to pay Business Rates, but this year I have received a bill?The threshold for not paying rates on empty property has signifi cantly reduced from April 2011. For April 2010, an empty property with a rateable value under £18,000 had no business rates to pay. From 1 April 2011, the rateable value limit is reduced to just £2,600, and those over this threshold will have to pay full business rates.

I don’t agree with my Rateable Value – can I appeal?Appeals can be lodged with the Valuation Offi ce, which could reduce your assessment over the 5-year period of the revaluation. Usually, it is best to seek professional assistance for this process, as it can be quite complex and tends to be carried out by experts.

Businesses suffering hardship may apply for Hardship Relief.

If you wish to apply for Hardship Relief, contact your Local Authority who are likely to request your latest set of fi nancial accounts.

downturn. However, some well-known but poorly fi nanced names have vanished from our high street.

This guide is packed with information, advice and tips from consultants who specialise in the retail and wholesale sector – as well as two case studies that demonstrate best procurement practice in action.

Download the guide for free from www.expense-reduction.co.uk

Table of Savings

Category Annual spend Saving (£) Saving (%)Stationery £57,500 £25,000 43%Landlines £18,300 £2,700 14%Courier £112,900 £24,300 21%Scrap Metal* £242,600 £68,700 28% (revenue) (benefi t)

TOTAL £431,300 £120,700 28%

*Project recently extended by three years

Mono Pumps – Scrapping scepticism and pumping out profi t