"Because of the economic crisis, we have been forced to re-examine all aspects of our business. One of the actions taken in order to maintain our competitiveness was to launch a global programme of cost reduction, for which we commissioned an external partner for the analysis and to follow a clearly defined purchase methodology”, begins Dirk Coveliers, General Manager at Maintenance Partners.
“We belong to an international organisation with locations in Europe, the Middle East and Africa. With 350 employees worldwide, we provide maintenance services for industrial rotating machinery. This includes among others, pumps, gearboxes, motors, turbines, compressors, generators and transformers. The main customers can be found in the industry sectors of energy, chemicals, petrochemicals, fertilizer production, paper, waste management, shipyards etc.”
“Under this cost reduction programme, we have worked with Expense Reduction Analysts for certain cost categories: energy (gas and electricity), waste management, cleaning, work wear and industrial gas. This external partner has helped us with the optimisation of the existing contracts with suppliers and with the draft of new contracts with new service providers. The process of optimisation was done in detail. After implementing the new contracts, follow-up procedures for invoicing were also put into place. The support was invaluable for our purchasing department. To paint a complete picture: amendments to contracts were negotiated retroactively. This was for instance the case with industrial gases. Some suppliers with whom we have been working for years were at first surprised by our cost reduction approach. However, once convinced of our objective, these suppliers have fully cooperated with us. None of our incumbent suppliers has been excluded. “
Make savings more visible
“Cost savings were immediately visible as soon as the first contracts were implemented thanks to monthly monitoring of billing data by cost category. The external partner has given us that data at quarterly follow-up meetings attended by all the stakeholders in the company: this includes the people in charge of purchasing or operating the products or services investigated by our external partner. Management and the board were also informed thanks to a one-page document summarising the total savings achieved.”
“A person is named in charge of each cost category to monitor the savings to achieve over the coming months. Of course, our analytical accounting allows us to ensure that savings are entrenched in the long run. We do realise this will not always be easy: The first savings are always easy to achieve, but ensuring their sustainability is the real challenge. Indeed, this cost reduction programme has not led to the outsourcing of services; our primary goal was to investigate thoroughly the purchasing process for goods or services. It was out of the question to take this initiative further at the expense of the organisation or of our employees’ satisfaction."
Greater savings than expected
“The cost reduction exercise is not a one-off event, but finds meaning in continuity. Because we were able to appoint experts who have conducted an analysis per category and made some very creative proposals, we went much further than with traditional methods. We have therefore achieved greater savings than we would have done internally. With the external partner we work on a “no savings, no fee” basis, with a remuneration system based on actual savings. This means we have created a win-win situation both for ourselves and for the external partner.“
Not an aim in itself
“A cost reduction programme is not an aim in itself; here it is part of a broader strategy. Thus we are not the only ones to benefit from the programme, our clients are also winners.”
The savings achieved reach 15% to 40% depending on the cost categories. In some cases, additional savings were realised through credit notes issued by suppliers with retroactive effect.