How to Approach Indirect Costs in the Retail Industry: Part 3

In the third of the 4 part series, we will dive more deeply into the second possible approach to finding savings in indirect goods and services:  Sourcing. You can also read part 1 and part 2.

Can you centrally source two or three key categories–waste management or security, for example–and show significant savings?

Although retailers generally cannot often mandate contract usage, sourcing and sharing those savings at an operating company level on a pro-rata basis often gains buy in and interest in sourcing additional categories.   Make sure you leverage the volume of your entire spend when conducting a competitively bid situation. 

Key to Success: Get input into specifications from operating organizations and make sure sourcing is “three deep” – that is, three suppliers for critical categories – and build a regional supplier base. Where possible, create easy “punchouts” through ERP or supplier-hosted systems to make procuring and payment as fast and simple as possible or allow use of procurement cards.

 

 End Game:  Consider getting consensus to centrally source long term, fixed contracts that do not require immediate or repetitive buying decisions.  Have a corporate financial group or indirect procurement organization manage these contracts but make sure local operating groups have a supplier hotline directly into customer service if anything goes wrong.  Another alternative: set up a call center to centralize service calls for plumbing, HVAC, lawn care, snow removal, security and other service contracts.  The call center can dispatch local, pre-contracted and pre-screened vendors by region.

Stay tuned for the fourth and final post of this series.

Still quiet here.sas

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