However it will involve a lot of walking.  Our course measures some 6000 yards for the holes alone which when you add on the walks between greens and tee I guess increases this to close to 7000 yards which is close to 4 miles.  You also have to take into account that no-one plays the hole in the shortest distance possible so this 4 miles is probably increased by at least a further mile, meaning each round will be close to 5 miles of walking while pulling a trolley with the clubs on and also trying to hit a little white thing as well.  That means total walking during the day of some 20 miles while playing some 360 to 400 golf shots.  I do not know how long this is going to take us but if you want to come and see us off you will need to be up bright and early!!  See you on the tee at 5.30 am.  I certainly do not intend emulating a gentleman whose exploits I read about in the Clubhouse at West Hills Golf Club Surrey recently who completed a full 18 holes of golf in just 54 minutes!!

Anyway the aim of this event is to raise money for a very worthwhile cause, Macmillan Cancer Charity and if you wish to sponsor us please click on the link below or paste the address into your browser.

http://original.justgiving.com/golf4life

Any donations welcome.  I will finish with a small piece about Macmillan provided by one of their fundraisers.

Macmillan Cancer Support improves the lives of people affected by cancer. Our aim is to reach and improve the lives of everyone affected by cancer and with the help of our supporters we are one step closer.

Cancer turns lives upside down and that’s why Macmillan Cancer Support exists. Macmillan’s nurses and our other services do an incredible job improving the lives of people living with cancer and supporting their families.

 Macmillan nurses are here for people from the moment they receive a diagnosis. Because cancer has such a wide ranging impact on a family’s life, Macmillan nurses are just one part of our team who help. We help with the financial impact of cancer by providing grants, we provide practical support such as a lift to hospital and we give emotional support to the whole family. We even lobby government on behalf of people living with cancer on the issues that are important to them.

 Nobody should have to face cancer alone. Currently Macmillan can only support 1 in 2 people.

Please help me and my fellow golfers raise the number from 50%

What does this mean for us as the man on the street.  Well a reduction in termination rates could lead to cheaper calls.  The current rate for the example above of someone on Vodafone calling O2 is 4.18p per minute.  Ofcom want to reduce this to the actual cost that they calculate it costs the networks to transport the call, from their calculations 0.7p per minute.  Obviously this is somewhat below the current charge.  Unfortunately the process is likely to be painfully slow and a decision is unlikely to happen in the near future.

What will this mean for the phone operators.  A reduction in revenues without a doubt, so I am sure they will look around for other ways of maintaining revenues.  Three have already taken the lead here, whilst they may be in favour of a reduction in termination rates they have announced that they will be charging their users 1p for each text received from early June.  Will this be the way the others will go.  The answer is probably.  You have been warned!!

Figures released last week showed that factory gate inflation rose by 5.4 % last month, up 0.9% on the previous month and a greater leap than that expected.  So what is causing this.  Well unfortunately the two items I mentioned in my opening paragraph are to blame.  The civil unrest in the Middle East has caused significant uncertainty in the oil market and caused the price of oil to rise.  The impact of this rise is not just felt in the costs of fuel, but in virtually every product that we buy and factories produce, as there are not many products that do not have some form of link to oil in one way or other.  From the extra costs of producing food, after all the pesticides and fertilisers used by farmers are generally oil based, to the additional costs in producing the drugs to enable us to stay healthy, the price of products is on the rise.  Certain of this increase can also be explained by the unfortunate events in Japan.  Concerns over the loss of supply of critical electrical components has also driven up costs.

So what can be done about it, surely if everybody’s costs are going up then there is nothing that can be done.  Not completely true however.  One critical element of cost management is ensuring that the service you are being provided is the service you actually need.  This can be best illustrated by a recent survey released by Billmonitor concerning mobile phone tariffs.  They estimate that 75% of mobile phone users are wasting an average of £200 per year by being on the wrong phone tariff.  That adds up to an incredible £5bn wasted annually.

http://www.bbc.co.uk/news/technology-12996175

I guess that is maybe not surprising really when the same research also estimates that there are a small matter of 8,134,979 different tariff combinations available to UK consumers today.  Well who wouldn’t be confused by that lot!!

I wish to end this muse by looking at a subject dear to my heart, that of management speak, in other words finding plenty of ways of saying something in a manner that gets away from the simple way of calling a spade a spade.  A recent television programme highlighted this problem and detailed the five most popular examples but I am sure you have your own:

1)      Proactive

2)      Think outside the box

3)      Joined up thinking

4)      Networking

5)      I hear what you say

David Brent eat your heart out.  The article that pointed me to this show was released on 1 April and I will leave it for you to decide the validity or not of it:

http://www.telegraph.co.uk/culture/tvandradio/8421611/Management-speak-5-most-annoying-examples.html

Case Study:

Download a PDF copy of the case study.

Left to right: Lee Freeman, Auditel Consultant and Jim Wilkinson Finance Director, Sportingbet

The market for online gaming is still relatively young but global broadband penetration and the development of ‘in-play’ betting on world-wide football leagues and sporting events means it is growing at a phenomenal rate.

So the main focus of Sportingbet’s business plan and management team has been revenue growth rather than cost control. The Group’s Finance Director, Jim Wilkinson, didn’t think there would be anything to lose by engaging Auditel consultant, Lee Freeman, to carry out a number of expenditure reviews.

“As a group, our main financial goal is to grow our top line by 20% per year, so we haven’t focused too much on our input costs over the last few years. Having said that, I was pretty confident we were in control of our expenditure and that the business wasn’t unduly wasteful. So, when Lee approached me, I couldn’t see that we had anything to lose by trying it out.”

Initially, Jim engaged Lee to review the UK office’s fixed and wireless communications, office supplies and IT consumables expenditure and, following his initial report just one month later, asked Lee to proceed with putting Sportingbet’s stationery spend out to tender, which was completed in June 2010. Lee was then able to use the results of this tender to re-negotiate with the company’s incumbent supplier, leading to savings to date of £23k, or 33%, on like-for-like products. Impressed with these results Jim gave Lee the go-ahead to proceed with the communications review and although Sportingbet were restricted on their choice of suppliers for fixed line voice traffic, Lee identified and implemented a new tariff from the incumbent supplier, saving 11% against their initial spend.

At the time, July 2010, Sportingbet were one year into a two-year contract for their mobile phones but Lee none-the-less put the company’s fleet out to tender and, again, used this as the basis for a series of complicated negotiations with their incumbent supplier who finally agreed, six months later, to a tariff refresh in return for a contract extension. This will lead to estimated annual savings of £40,000, or 35%, based on current usage, although the final figure is expected to be higher as the company’s fleet of phones is growing. At the same time, Lee also renegotiated new rates for Sportingbet’s International Toll Free numbers – particularly significant to an organisation with global outreach – which are expected to deliver further annual savings of £20k, or 58%.

As Jim says, “Lee has just got on with the job and delivered impressive results in a very professional manner. Most importantly, his savings have made us realise that as an organisation we need to change our attitude towards cost management. We can’t keep spending money right and left. I’ve now set a cost reduction target of £2m for the group and we’ve employed an internal resource to help us centralise our procurement globally. Most importantly, we want to work with staff to change their psychology and working practices in relation to expenditure and Lee will continue to work closely with us in the UK to help us achieve this goal. He’s already working on new projects to review our insurance, travel and broadband expenditure and I definitely see him as a member of my management team.”

Savings Achieved:

Stationery – £23,000 33% Saving
Fixed Line Voice Traffic 11% Saving
Mobiles est. – £40,000 35% Saving
Toll Free Numbers est. £20,000 58% Saving

Other planned projects:
Insurance, travel and broadband costs

Download a PDF copy of the case study.

So why the confusion, surely two learned economists could agree on where we are and what is likely to happen in the future?  Well no they couldn’t which I guess proves the theory that you can make any set of numbers tell a thousand stories.  So was there any agreement.  Well you will be pleased to know that there was, and the point they agreed on is that the UK is officially out of a recession, although the shape of the recovery differed, one preferring the “U” shape with the other the “V”.  To be honest I don’t really care, we are out that is the main thing.

A second point of agreement, I think, came in looking at the global economy.  The view was that this was booming, being driven by the developing economic countries such as India and China.  Good news I hear a lot of you cry as most people believe that an increase in exports provides the best means open to us to bring the good times back to the UK.  Unfortunately not when you consider that the level of exports from the UK to the BRIC countries is significantly less than the level of exports to Ireland.  There are opportunities out there, it just appears that in Britain we are not necessarily best placed to take advantage of them, unlike certain countries in the world such as Australia.

So with two points of agreement where did the differences arise.  Mainly in terms of where the UK economy goes from here.  Given the various bits of economic data that have been published in the last week or so, I guess it is no surprise that there was a difference of opinion here.  It is certainly fair to say that one expert saw a better landing for the UK economy in 2011 than the other.  Having listened to both views it is hard to find arguments against either, which leaves me totally confused.  To give you an idea on some of the differences, views on interest rates differed from a rise happening in May 2011 to none at all in 2011; a double dip recession being very unlikely on one side of the coin to maybe being more likely than not on the other. 

I guess at the end of the day my take on the two conflicting views is that there is still a high level of uncertainty out there and that the road to recovery is going to be stormy with ups and downs occurring at will.  So what does this mean for you.  Well one of the messages I heard from the experts was that with the UK economy growing by only 1.5% in 2010 against a long-term trend rate of 2.5%, the shortfall of 1% leads to spare capacity in the system which effectively erodes a company’s ability to raise prices.  This means that attention still needs to be given to cost management and driving efficiencies from processes as much as it does with seeking to growing the top line.

I thought I would end this rambling with a quote from one of the presenters which I found rather amusing and it was that “Brits are very good in doing the right thing at the wrong time”.  While we spent while going into a recession we did not take advantage of the low point in the market to start investing and instead started hoarding and keeping our cash very close to our hearts.

The first was the result of a survey by KPMG and the Chartered Institute of Personnel and Development which indicated that two out of three employers expected to have less staff in 2011 than 2011. 

http://www.theregister.co.uk/2011/02/14/jobs_forecast_grim/

Now I know statistics can be made to say basically anything you want them to, but this did seem a very large number to me.  It also comes at a time when the number of people unemployed is rising and the public sector cuts, which we heard so much about last year, start to bite as well.  But are there alternatives?  The answer to that is obviously yes, providing action is taken early enough in the process to make a difference.  In my recent blogs I gave everybody 13 free tips on how to save money on your essential business expenditure, and by following those tips you will achieve savings.  So if you do achieve savings, could this make the difference to making somebody redundant or not.

Let’s consider the facts.  On average across the Auditel network we find savings averaging 22% for our clients.  If we assume annual expenditure under audit of say £200k, not unreasonable in an SME, this level of savings would equate to an additional profit of £40,000 before our remuneration.  With an average national UK wage of say £25,000, this additional money could be used to continue to employ at least one extra person in the business rather than maybe making them redundant.  Not only is their salary covered by the additional savings found, but there will be other related savings as well:

• No redundancy payments to be made
• No legal fees incurred in ensuring the relevant legislation is followed in instigating a redundancy programme.
• No loss of the experience of that individual for the business.
• No need to incur recruitment fees when that person needs to be replaced 6 months down the line when business picks up again.

Taking all of those additional saving into account, it does mean that employing cost management experts such as Auditel is indeed self financing.

One of the reasons why I expect the above survey revealed such a high proportion of companies looking to reduce staff numbers is due to the increasing price of raw materials and this was the second article that caught my eye. 

http://www.telegraph.co.uk/finance/economics/8331754/Industrial-recovery-gathers-momentum.html

Some of these such as the price of oil are generally outside your businesses control as they are driven by macro factors, such as the unease in the Middle East at present.  However although you cannot control the price of oil you can control the impact it has on your business.  For example the higher price of crude ultimately affects the price of fuel which will affect your distribution costs, both directly in terms of distributing product to your customers but also indirectly in terms of increasing the cost to your business of having raw materials delivered.

Recent data has suggested that order books for manufacturing companies remain strong but that the majority of firms have stated that they believe they will need to raise prices for domestic supply this year.  So what can you do about it?  Maybe nothing about that cost itself but you can ensure that all your other costs are under control.  This will help free up profit and cash from other parts of the business which can be used to offset the increased costs elsewhere.

13.  Get buying support

You will have seen from the previous instalments on this subject that a number of the comments are common sense really and if you follow them you will certainly achieve some savings for your business.  However will you achieve the full potential of the savings?  Unfortunately the answer to that question is undoubtedly no.  Why I hear you ask, the answer is simple really and it comes down to one of resource.  Unless you employ somebody full-time to look after this area it will always be just another responsibility for somebody out of a range of responsibilities and therefore will not always receive the attention it deserves.

So what can you do about it, well keep reading!!

• The easiest way is obviously to seek external assistance.  This may take the form of procurement consultants or energy brokers for example.  A note of caution however, be aware before employing such a resource of how they are remunerated?  Are they paid by you or the suppliers.  If they are paid by the supplier, can they really be independent?  Will they recommend the best price in the market place from all suppliers, or simply the one which is paying their commission?
• Look at various portals and websites.  The internet has been a wonderful invention and although it does mean it requires some internal resource from your business, signing up to a few monthly newsletters will enable that individual to very quickly become an “expert” in a particular market.
• Make use of membership organisations and affinity groups.  A number of professional bodies that I am a member of all provide services at specific member rates.  Again be aware that these will not necessarily be the best prices that you can obtain but they will probably be better than doing nothing

• LAST BUT NO LEAST IN ALL OF THIS, EMPLOY AUDITEL THE UK’S PREMIER COST AND PURCHASE MANAGEMENT CONSULTANCY TO UNDERTAKE THIS WORK FOR YOU.  We are completely independent of any supplier in the market place and with our contingency fee model we are only paid on results, so there is no upfront cost to the business.  What is more we even offer a free Business Health Check as well, which means that we will review your current spend and provide details of potential savings at no cost to yourself.  As a number of my contacts (and indeed clients) say to me this really is a no brainer.

I like to look at it in the following way.  If you had a problem with your company’s tax return and faced a demand from the Inland Revenue for payment, I very much doubt you would undertake resolving this matter yourself, particularly if the area of tax law was very contentious.  No you would employ an expert to do so for you (who probably will be on an hourly rate therefore costing the business money whether they are successful or not).  Well why should managing your costs be any different!! 

The enlightened amongst you will do something about it and hopefully contact me to assist.  The others that don’t will keep muddling on as you have always done, confident in your own belief that you are an expert in the markets for all services you use in your business.  I hazard a guess as to which would be the more successful business of the two, particularly in today’s challenging environment.

10.  Beware the renewal process

• Now this only applies to those services that are contractual in nature and one of the key areas where this is relevant is the energy market.
• In particular be aware of automatic renewing contracts.  Often the renewal letter is sent out 120 days before renewal with 90 days notice being required to cancel the contract.  In effect this gives you 30 days in which to act.
• That appears plenty of time so what are the issues:
  • The letter often does not state it is a renewal letter and may therefore get disposed of by the postroom before it even has an opportunity to reach the requisite individual.
  • It often will not be addressed to the correct individual or have the correct address for that individual.  This can be particularly true where we are dealing with multi site operations.
  • Make sure that your tenders are sent out in plenty of time, and that responses are received within the window as stated above.
  • It is also important that you receive confirmation of any termination letters sent, and deal with any objections raised as soon as they are raised.
  • Always include the incumbent supplier in this process but be prepared to leave if necessary.  Suppliers often make it as difficult as they can for you to leave as they recognise that it is more costly to replace business than retain it. 
  • At the end of the day if you are proactive you are far more likely to receive a better deal as you can guarantee that most of your peers and competitors will not be.

11.  Manage your suppliers

• This is key to the success of any purchase strategy and cost management process.
• Make sure you carry our regular cost reviews.
• Ensure suppliers meet all up to date regulatory requirements.
• Try and align your ambitions with theirs, work closely with suppliers and understand their processes as well.

12.  Manage your costs

                As key as managing your suppliers is the active management of your cost base:

• Make sure you check every bill for errors – this includes ensuring any charges are raised in accordance with the contract agreed with the supplier.
• Make sure you follow-up on any errors and ensure any credit note is checked as well.
• Check the usage of the product, and do this over time rather than short periods.  This will both help to identify any anomalies but also provide more accurate data when the next tender process is undertaken.
• Control any leakage.  One of the key areas we often find where spend goes up is on batteries just prior to the Xmas period.  Some people view this as perk of the job but why should it be? 
• Never be caught in the trap of just paying an invoice because it is similar to last month, there is no guarantee that last month’s invoice was right either.

8  Tender the market

• Now you know what you want and why you want it, the time has come to go to the market and buy what you want.
• Select a panel of suppliers that meet your needs – talk to them and explain the exercise you are undertaking and the fact that you want to include them in the process.  Always talk to your incumbent supplier as part of this and explain what is going on and why.   Make sure they feel part of the process and that the decision to tender does not reflect on the service they have been providing.
• Often it is best to explain your criteria in a formal document.  This avoids any disagreements at a later stage.  Be prepared to give potential new suppliers details of level of spend, although under no circumstances give them exact prices, they may just undercut by an amount they feel they need to win the business, rather than giving you what you want which is their best price.
• Determine your selection criteria, and make suppliers invited to tender aware of them.  These should include certain service criteria as well as cost.
• Set a reasonable deadline for responses.  Depending on the complexity of the supply this could be in a couple of months or so but generally allow no longer than one month.  Make sure you send a reminder a couple of days before the deadline expires.
• Evaluate the responses in accordance with your selection criteria and feed back to those that were unsuccessful explaining why. 

9.  Negotiate – price and terms

• Once you have identified your preferred supplier it is important that you identify the total cost of purchase.  Be aware of items such as:
  • Transitional issues and set up costs
  • Exit costs from any current arrangements.  I have seen clients who have wasted the savings achieved from a new supplier in exiting historical arrangements.  Makes sure this doesn’t happen to you.
  • Look at the ongoing costs including minimum spend levels.
• Be sure you read the contract thoroughly. Be particularly aware of:
  • Term of supply and termination – avoid contracts with an automatic rollover clause if possible.
  • Avoid exclusivity clauses, unless they can be used to your advantage.
  • Obtain the payment profile that suits your business, but also be fair and stick to this.
  • Establish service levels etc
• Make sure that any agreement is in writing and do not rely on verbal agreements.
• Avoid being over sold any item, you have identified what you want and why you want it, so stick to the script.  Volume discounts may sound nice, but do they actually benefit your business.

5.  Know the regulatory environment

• Be aware of all your legal obligations.  This does not just apply to the obvious areas such as disposal of waste etc but also in other areas such as insurance, membership of professional bodies etc.  Unfortunately we are living in a more litigious society than ever and so ensuring you know the consequences of certain events happening in your business is key.
• It is not only relevant to know what your obligations etc were at a given point in time but it is crucial to keep up to date with any changes.  Regulatory changes seem to happen far more frequently nowadays and it may seem virtually impossible to keep up to date.  However there are various good sources out there, not least of which is often the Regulator’s website itself.  You are often able to register to receive free updates, or include the RSS feed in your lists of favourite RSS feeds.  This means you will receive electronic notification straight to your inbox of any changes and make it far easier to keep up to date.
• Be aware that certain protections in some areas that are available to individuals are not available to corporate entities.  Be aware that ignorance is not a defence that tends to last very long in Court.  Ensure you document your decisions and the reasons for reaching them.

6.   Develop a purchasing strategy

Now that you understand what you are buying, know you need the service and understand the regulatory environment it is time to bring all this together in a purchasing strategy.   When doing this there are some key points to bear in mind:

• Use you purchasing power as a marketing advantage.  Now you have all this information about your spend and why you are incurring it, use it to your advantage.
• Buy local.  It makes good sense to seek to source your supplies locally.  Not only will this help the local economy and indirectly hopefully your own business but also improve your visibility to the local economy which will also hopefully reap benefits.
• Implement a sustainability policy, which helps in setting suppliers expectations as well.
• Carry out regular cost/supplier reviews.  Do not be afraid of speaking to your suppliers, they need to manage their business as well and information from their customers can only help that process and hopefully enable you to achieve better prices.
• Most of all avoid lethargy.  Look at tendering for supplies on a regular basis; don’t just think that because you undertook a major exercise two or three years ago that that is it.  In today’s markets prices do not stand still for long and ensuring you have the best prices for the services you require to run your business should be a key element in the strategy you set for your business.

7.  Know your market

Now you have developed your purchasing strategy a key element to this knows the market in which you are buying.  Again it is important that this is a continuous process and not seen as only being a regular review.  The following steps should assist in this process:

• Research the market, know suppliers in the market and price levels.
• Keep aware of price trends – with the internet this is a far easier task than it was historically.
• Keep up to date with regulatory developments that may impact prices.
• Be aware of technology advances, in today’s market these happen quick and fast.  Ensure your organisation is at the forefront.
• Look at your competitors and see who they are using.
• Most of all talk to your network don’t be afraid of sharing thoughts and information.  Those who read my blogs regularly will know I am a firm believer in the belief that there are both givers and takers in this world, and at the end of the day it is the givers who tend to come out on top.