Founded in 1991, Kondor Ltd is a metallurgical company based in Prague, Czech Republic that sells metallurgical materials to a wide range of clients from construction, commercial and manufacturing businesses to retail. With 120 staff in its headquarters and 8 branches, the company realises an annual turnover of 16 million Euros.
Mr. Valenta, General Manager and co-owner, commissioned Expense Reduction Analysts to investigate several cost categories. The Expense Reduction Analysts team comprised of: Tomáš Krýsl, client manager, Pavel Sikora, expert in bank services, Pavel Cajthalm, expert in energy, David Pinka, expert in transport and Petr Němec, expert in telecommunications.
Investigating banking services: A difficult assignment
The optimisation of bank services costs for Kondor was, to the Expense Reduction Analysts experts, both a challenge and an exciting mission as bank services are a cost category seldom investigated.
However, from an analyst’s point of view, it also appeared like a kind of “mission impossible” as the client had indeed contracted 8 different loans with 2 banks (4 investment loans and 4 working capital loans).
The project was led successfully thanks to an excellent collaboration between the client and the bank services expert at Expense Reduction Analysts, Pavel Sikora, who managed to convince both existing banks to agree to a short roll-over of their working capital facilities, i.e. so that they would all end at the end of 2012 - which would allow a reasonable (however not excessive at all) timeframe for a proper project. Despite a careful preparation of the tender as well as a selection of the bank suppliers invited to bid, the final offers differed significantly not only pricewise (from 8.79 % to 24.78% in savings), but also in quality; for instance one of the existing banks offered a regulation of the working capital loan such that it would in fact cause the client’s insolvency.
Based on Expense Reduction Analysts’ recommendation, the client did not choose the best offer in terms of price, but that of a corporate bank, which the experts thought could deliver the highest quality service – alongside with savings of 20.5% (the second best offer).
This option was combined with the offer and services of one of the incumbent banks that was able to provide better conditions for the investment loans. All in all, the company achieved savings of an estimated 24.3%. When adding extra costs such as refinancing existing investment loans and other costs for paperwork and IT, the savings still reached 22.7%.
Improved prices and quality
Besides savings of around 40,000 Euros a year, the client can now expect many benefits among which:
In addition to the implementation and monitoring of options, Expense Reduction Analysts has also offered support with a pre analysis of possible IPO and potential debt issues - i.e. playing a true role of trusted advisor with the client.
Investigating energy costs
Expense Reduction Analysts Pavel Cajthaml, expert in energy costs, was in charge of investigating this cost category. Natural gas was used for office space heating, which made it possible to plan savings on two levels: regulation of gas consumption and cost optimisation for the category.
However, electricity costs are dependent on both the price of the commodity and the price of distribution. Most of the consumption was made in the headquarters, where the electricity contract covered a fixed period, making it difficult to act on the price of electricity, whilst branches were supplied by different electricity providers. To reduce the consumption of electricity in the headquarters would have necessitated large investments; therefore it was decided to concentrate on reducing the price of gas. Following a tender, the client chose one of the options proposed by Pavel Cajthaml which meant annual savings of 10.4% with a two-year price guarantee.
The Expense Reduction Analyst expert was able to open negotiation within the fixed period running contract with the main supplier and provide the client with significant improvement of costs. This project highlighted the need to have detailed knowledge of the energy market, not only in terms of competition but also in terms of products and services available to find alternative ways to optimise consumption and costs.
Bringing an additional level of security into voice and data communications
When Expense Reduction Analysts took charge of the telecommunication project at Kondor, telecommunication expert Petr Němec was faced with running contracts which could not be terminated due to excessive cancellation fees (typical for telecommunications). The expert suggested waiting until the contract was half completed and then revisit the conditions with incumbent suppliers. In the meantime, he ran a test request for information covering price and technological qualities of potential suppliers’ offers. The result was quite impressive. Not only the cost of mobile services was reduced by 27% but the reliability of voice and data transfer was also increased. The supplier provided similar backup solutions for all the branches to what Kondor had at headquarters. Simply put: Kondor saved on costs whilst getting an improved quality of service.