By July 28, 2008 0 Comments Read More →

Have you cut operating costs lately?

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On a forum recently, a Facility Manager was looking for ways to save costs at his facility due to the current economic pressures. He identified a few things he was doing, mostly the common low hanging fruit items, and asked for ideas.

Having  been in that situation as an FM and responded to it as a supplier, I learned that a good source for cost savings ideas can be your suppliers. Yes, it can happen, but you need to approach it properly.Face it, they know best what is needed and what's not. They can tell you easily where the pain points will be and where you can make some shifts to save dollars.

Like anything, you need to provide an incentive, or to put it another way, reduce the disincentive.  Ask them to cut their profit margins or fixed overhead components and you won't get much help. Ask them to cut costs without adjusting performance standards or expectations to match those cuts and you will get blank stares.

On the other hand, ask them to identify areas where their expertise suggests savings are possible at your buildings and ask for reductions in real costs rather than based on unit pricing rates (which include profit, overhead, risk, etc.), and you will get cooperation. Sweeten the pot with an extension or renewal, and they will love you (trading off some price/cost reductions with an extended contract means they won't have to bid again soon, which carries a cost and risk to them)

Three specific examples:

  1. Janitorial reductions : specifications are reviewed and the areas where changes wouldn't have a large impact are considered and proposed frequency/service reductions save costs by reducing hours.
  2. Landscaping: A specification had 22 cuts per season across a portfolio. By eliminating cuts when it wasn't really needed (it was a dry season) the supplier cut their costs based on the skipped costs, but retained their profit and overhead.
  3. HVAC:  Routines done 'by-the-book may' be too frequent based on the environmental conditions and the run-time of the equipment. A good HVAC contractor can identify where frequencies can be stretched or routines skipped in a period, saving costs without affecting the equipment or service.

Work with your suppliers more as skilled and knowledgeable partners than an adversary and you can reap the benefits.  Consider their business needs as well as your own and you can develop win-win situations that get you results and reduce costs.


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