Cost reduction services opportunities continue to bloom
With the threat of a 'double-dip' recession looming across the world's economy, it can be difficult to envisage that any industry is experiencing real, unprecedented growth. However, over the past five years, the cost reduction sector has enjoyed just that and continues to do so.
Since 2008, when the global financial crisis first raised its ugly head, cost reduction and efficiency savings have moved dramatically up the list of priorities for businesses in most sectors. Companies which could rest on their laurels before the crash are now faced with a much more competitive market and have had to look at reducing their costs to stabilise their position within their market.
While the need to cut running costs is an obvious driver behind the rise and rise of the cost reduction sector, there is also the question of resources pushing Directors to look at their essential spend. This is particularly true for SMEs, which not only lack the time to shop around for the best tariffs, but often lack the necessary in-house expertise to negotiate contracts or fully manage accounts. Suppliers of energy and telecoms in particular take full advantage of this and have developed numerous (some would say "sharp practice") ways of exploiting such companies with roll-over contracts, "take-or-pay" clauses and so on.
So, what value can a cost reduction company really offer businesses and how to they differ from a traditional broker?
Well, in essence it comes down to the level of service. A good cost reduction consultant works in partnership with a company to become part of their cost management team.
Their input ranges from advising clients on how to make efficiencies across the more obvious cost bases through to advising on new or expanding practices such as green services.
Once a client has used a good cost reduction consultant, it is unlikely that they will ever look back and why would they, knowing that an experienced person is fully managing all their contracts (including the small print), sourcing the best tariffs from their extensive network chain of suppliers and managing renewals?
Cost reduction companies become a vital part of their client's resource management team, freeing up directors to get on with running their business.
So what does the future hold for cost reduction? Well, despite the unprecedented expansion and success of this sector, a recent YouGov survey of 1,300 companies found more than a third of firms hadn't taken any steps to save money on their running costs. This was despite 84 per cent recognising that cost savings could be made. These figures offer a glimpse at the opportunity presenting itself to cost reduction companies.
Reported by BCR Associates' founder Chris Battin