Finding savings in one cost category can make a significant difference for any business, so when average savings of 27% are found across three categories, the end result for Queensland based Everhard Industries was impressive.
Company Overview
Everhard Industries is one of Australia's oldest manufacturers of kitchen sinks, laundry tubs, mixer taps, surface water drainage systems, wastewater treatment systems and stormwater pollution traps.
Last year, the company celebrated 80 years since it's inception in 1926 and today the company is represented in every state, employing more than 300 people at 10 sites throughout Queensland, New South Wales and Victoria.
The challenge as a manufacturer in a market competing heavily against imported product and cheap off shore labour, for Everhard the ability to contain costs lends significantly to the competitive advantage of the company. The benefits of conducting a forensic analysis of overheads and operating expenses were clear, yet the company needed to identify the potential areas of saving and a method of implementing a
cost containment strategy on a zero-risk basis.
Traditional consultancy models charge up front fees for work undertaken to identify areas of cost containment, with additional rates applicable for implementing findings. The risk of savings identified and successfully implemented being lower than the fees sustained for services was considered too high, so Everhard sought another solution and found the
Expense Reduction Analysts model gave them everything they needed.
Everhard engaged ERA to provide a no-risk review of costs. It was felt an ERA Review would be able to benchmark costs with no fee being charged if no savings were found and Everhard was confident ERAS model would assure them of no compromise in quality and service.
The Process Based on years of experience and forensic analysis of typical cost containment scenarios, ERA started the review process by examining telecommunication costs. This provided a clearly defined cost category through which Everhard was familiarised with the ERA approach and given an early indication of how results would impact on the company. Key stakeholders in existing supply agreements were involved at every stage of the process and related knowledge was efficiently managed.
Once the telecommunications review was complete and savings identified, ERA moved into other categories, conducting the same process across office supplies and printing services.
ERA Associate Brett Hay explains the unique nature of ERAS process further:
"Every business operates on margins and percentages, but few have the resources, skills and applied knowledge to determine if the supply relationships they rely on are really delivering value to their business. ERA has a vast database of supplier information and we are able to compare the prices our customers pay for key services against a broad market. Typically, we identify overpayments in several cost categories of an average 23%."
ERA ultimately identified significant overpayments in three large cost categories for Everhard and once confirmed, began the process of implementing the containment strategy.
Outcomes and Benefits — The Customer Speaks
ERA was able to improve on cost savings in the following areas: ·
- Telecommunications: 38%
- Office Supplies: 15%
- Print: 24%
Over the course of the containment implementation, ERA brought Everhard's supply arrangements closer to best market practice, whilst at the same time retaining the incumbent suppliers and reducing costs substantially.
The experience with this review showed that ERA, through its specialist focus, is often able to find improvements that the client may not have the time nor the expertise to uncover.
Everhard General Manager, Tony Formica commented, "Incumbent suppliers often tend to take their position for granted and over a period get blase about their relationship. In our case, the very act of pitting them with other competitors made them pull up their socks and sharpen their pencils, and we were able to glean some decent savings."
"The "no-risk review" made it easy for us to take the decision to go with ERA. All the administrative work of tendering, evaluation and analysis was taken care of by them. In the end, it was a "win-win" situation."
As a result of these savings ERA have been requested to review further cost categories, including specialist cost analysis to ensure that operating expenditure is kept at industry best practice levels.
26-Nov-2007