Running costs
did a great job to boost their permanent recruitment numbers will find their temporary agency spend increasing soon as employees move back into preferred or higher paid sectors as Covid restrictions are lifted.
2. Review your third-party spend and contract data Extract and review all supplier spend data from the last 24 months, same as your operating costs. This will usually be purchase order data rather than invoice data and this will enable you to review the detail and then cleanse and categorise accurately. Remember to include purchasing card and expenses data, which is often captured and held separately. Match historical spend to any known
future budgets or changes in operations that may alter the spend profile i.e., a planned reduction or increase in sites or services. Once categorised, review the spend data by supplier against signed contracts to identify gaps in compliance and risk, and look out for any contracts that have expired or are due for renewal in next six to 12 months. For the purpose of this article, this part
of the procurement process has been over-simplified. Put simply, you need to focus on high and/or key repeatable spend, and areas for an opportunity to avoid or reduce costs and improve efficiencies, whether via consolidation, rate reduction or contract negotiation.
3. Review supplier’s terms, benchmark rates and identify leverage Ensure that an appropriate contractual process exists for all suppliers, especially those with material spend levels. Then benchmark your key supplier rates
against the market. Such benchmarking reviews will usually identify areas of opportunity in any contract, whether via improvement in incumbent terms/ rates, or competitive change of supplier (accessing current and accurate benchmark data can be challenging). As Marr Procurement sources over
£1bn per annum of goods and services, we have access to current pricing for many spend areas that we leverage for our clients. As a smaller health and care provider, you may benefit by leveraging our buying power and of course other options already exist in the market today to leverage the buying power. Collaborating professionally and openly
with your suppliers is key, especially securing win-win opportunities. Simply demanding greater discounts without ensuring your supplier can maintain good service levels could create risk and animosity. Suppliers must be allowed to make a sensible profit, ensuring sustainability for all.
4. Audit supplier invoices Always check that key and repeatable supplier invoicing is accurate, i.e., discounts, rebates and prebates have been applied correctly and that key performance indicators/service level agreements have been achieved. There may be potential for an immediate bottom line cashflow boost here. Yet be careful! If found, and even if
contractually due, you may need to liaise with your SME suppliers for a payment plan - especially at this challenging time - to avoid crippling your partner.
5. Consolidate the supply chain Undertake a review of your annual spend and supplier terms which will help to
identify opportunities to consolidate categories/suppliers and immediately - except for contract restrictions - leverage volumes for improved rates and terms with third parties. This could also realise additional cost savings from process efficiencies, such as reduced administration in ordering, invoicing and supplier management.
6. Stop or reduce maverick spend Spend outside of preferred suppliers – often known as maverick or rogue spend – can account for up to 80 per cent of the supply chain. By identifying and categorising this tail of spend by repeatable and project spend, it is always possible to identify opportunities to save money fast via consolidation, negotiation and even stopping non-required spend altogether.
7. Review budget and ordering sign-off processes Review and enhance your budget and approval processes to create tighter control but without creating detrimental operational challenges. Embedding tighter ordering processes across the business will ensure only strictly necessary purchases are made – cutting down on excess costs, storage costs and administrative costs.
8. Review specifications and inventory levels Review the specifications, with key business owners, of key and repeatable goods and services being purchased. Can a lesser specification at a lower price still achieve the same outcome? Do you really need branded consumables? Can you insource more services, etc? Can your operation function with lower stock levels to reduce admin, wastage and storage costs?
9. Ask your employees about savings and efficiencies A great way to win the hearts and minds of others in your business, is to conduct an employee survey where savings could be achieved. They will likely identify areas you may not have considered, and such buy-in/engagement can work wonders for helping deliver the savings quickly and maintaining a culture of savings identification and delivery, and process- efficiency thereafter. Be careful that you create the right
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www.thecarehomeenvironment.com • October 2021
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