Unscrambling the egg: how internal reviews can get messy

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Retail and Wholesale Trade

Project information:

Industry: Retail
Category: Telecommunications

 

The client

After completing category reviews in fleet management, printing, and freight for our client, the CIO requested a proposal for telecommunications. However, upon reviewing he decided he had the expertise to conduct the review himself. Upon tender completion, he relayed to Expense Reduction Analysts the results of rates he negotiated and the forecast savings of $150k per annum on the $2m spend. He also advised us that he had decided to change supplier.

 

The issue

Twelve months passed when the CIO called Expense Reduction Analysts, requesting assistance in a dispute arising with the previous supplier. As it turned out, when faced with what is always the most challenging stage of any project, the implementation, he had procrastinated. He had still not completed the transition, believing that the supplier would be appreciative of the extra business they were receiving, post the date of advice of intention to transition.

However, what he hadn’t considered was the level of expenditure on the residual voice services dropping below the monthly threshold of contractual eligibility. This was a trigger for rates to return to the standard price list, across all calls and line rentals. Local calls went from 4c to 50c each, calls to mobiles from 3c to 80c per minute, and line rentals from $20 to $40 per month. This meant that the monthly spend for all services rose from $90,000 to $218,000. By the time Expense Reduction Analysts was brought in to negotiate, the second month had passed ($180k) and a further month ($168k) before negotiations could begin.

 

The lesson

When clients choose Expense Reduction Analysts for cost saving, perhaps they don’t appreciate the value of outsourcing risk. Of course, implementations don’t come without issues, even with us, but experience, supplier relationships and category expertise change the implementation landscape.

Expense Reduction Analysts takes on the responsibility of the contractual issues, and communicate with both incoming and outgoing suppliers. We take on the issues that are inherently problematic in implementations and ensure the savings are delivered.

This is something all clients need to be aware of when considering running the process themselves.

A few more examples