Difficult Cost Group Brought under Control

The challenge for the Finnish hardware chain Starkki, with its retail network of 22 stores, was to make the chain’s cost management more centralised. Strategic expenses, such as goods purchases, where already managed centrally, but general business expenses, such as premises services, were managed separately by each individually operating location. Expense Reduction Analysts helped Starkki to bring these costs under centralised control and to achieve savings.

Expense Reduction Analysts’ experts Pekka Perttunen and Juha Malmberg helped Starkki standardise service models, reduce the number of service providers and set the same quality requirements for all service providers. As a result, Starkki was able to bring within the scope of chain management a cost group that had been laborious to handle and had lots of locally-managed service agreements.

In addition to cost savings, an improvement in operational efficiency was therefore achieved when working practices were standardised. “Expense Reduction Analysts’ experts started by collecting data about the starting situation and by analysing all costs, agreements and service instructions associated with premises services. When the cost structure of every operating location had been reviewed and classified, Expense Reduction Analysts’ professionals found in the market the best options though a competitive tender,” says Starkki’s Chief Financial Officer, Esa Yli-Maunula.

“The project covered an annual cost group of around EUR 1.3 million, which included, for example, cleaning, real-estate management, waste management and security. In this cost group we achieved an annual saving of 17 per cent,” continues Yli-Maunula. “The saving is important, but we assign even greater significance to the operational benefit we have gained through cooperation. Expense Reduction Analysts’ experts, through their process expertise, helped us improve our operational efficiency. The experts’ review of the starting situation, the action recommendations they gave, and the brisk implementation of the competitive tender were of valuable assistance to us,” explains Starkki’s Project Manager, Veijo Karjala.

Costs down and quality up Cost management does not just mean a one-off cost cut; savings arise as a result of a successful project in which quality has been improved. “The introduction process and operational monitoring play a key role in ensuring service quality and cost savings. An essential element of Expense Reduction Analysts’ operating model is a monitoring period during which these aspects are closely tracked,” says Perttunen. “We centralised our agreements with a few service providers nationwide.

The change reduces the administrative burden on store managers, makes our customer experience more consistent and streamlines chain-level financial management and reporting,” says Karjala. “As a result of our cooperation with Expense Reduction Analysts, our store managers can focus better on doing their real work, i.e. serving their customers. Nationwide cooperation in premises services means that a customer entering a Starkki store can be sure that the cleanliness of stores, for example, will be equally good all over Finland,” adds Karjala.

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