Guest Blog By Brian Miller
With profit margins shrinking and overhead costs soaring, retailers are under immense pressure to cut costs. While most business managers look far and wide for new cost saving ideas, too few are looking at indirect categories as a way to cut costs.
According to sourcing data from the past two years, retailers could save hundreds of thousands – if not millions – of dollars by competitively sourcing facility maintenance services like store cleaning, floor care, and snow removal. The problem is that many businesses simply aren’t challenging their suppliers in order to secure the lowest prices.
The results speak for themselves: Businesses that competitively sourced service contracts saved an average of about 22 percent. Even more impressive – nearly every e-auction delivered cost savings.
Looking more closely at the numbers, organizations that competitively sourced lawn care services achieved the highest average percent savings per event – 36.23 percent. The data also shows that floor care, store cleaning, and snow removal services provided buying organizations with significant savings:
- Floor Care: 24.15 percent per event
- Store Cleaning: 27.15 percent per event
- Snow Removal: 15.92 percent per event
Additionally, purchasing execs were able to uncover high cost savings for trash hauling services (7.6 percent) and parking lot maintenance services (15.21 percent).
So why aren’t more businesses challenging their facilities maintenance suppliers for lower prices? Frankly, because many procurement executives are overly confident in the value they derive from their suppliers. The recent report – The Sourcing Confidence Bubble – found that 75 percent of buyers that don’t use e-sourcing feel their suppliers currently give them the best possible value – but market reports tell a different story. Aberdeen, for example, found that companies save an average of 16 percent through e-sourcing techniques.
To maximize value and secure the lowest costs possible, procurement professionals should put pressure on their suppliers by inviting competition, and let facilities maintenance service providers duke it out for their business. By regularly evaluating their service needs – and sourcing seasonal maintenance needs like lawn care and snow removal about six months in advance – retailers can regain the upper hand in negotiations, and unlock thousands of dollars in savings.
Brian Miller is VP of Services for Intesource, which provides enterprise e-sourcing and spend management services and solutions.