Organizations spend far more than is necessary on what they buy.They typically do not have the resources to dedicate to the specific discipline of cost reduction as they need in order to be completely thorough.
Our executive team has been providing spend management services to organizations since 1992, and we have succeeded in producing savings for every one.
The biggest challenge for us is our client’s openness to cost reduction: are they genuinely motivated to reduce costs? How will their people react if we help them reduce costs? On our end, since the overwhelming majority of our revenue is contingency based, we need to know that there is true management support for the cost reduction process.
The process is designed to have our staff invest the necessary hours doing the “heavy lifting”. Once we get the vendor contact information, we deal primarily with the vendors for the data -- we go to our clients for individual questions and key decisions.
Ours is a three-part process:
1) FULL PROCUREMENT AUDIT
We begin from the bottom up, examining expenditures, product-by-product, vendor-by-vendor, vendor category-by-vendor category, and sku-by-sku…
Phase I – Gain thorough understanding of client’s operations and purchasing culture
- Interview senior people to set parameters and goals
- Review 12-month accounts payable report
- Analyze AP report, by specific product category and supplier
- Interview client end-users and/or buyers to obtain necessary subjective data and background
- Target and then prioritize spend categories and specific suppliers for cost reduction initiatives
- Compile targeted-supplier contact information
- Begin working directly with vendors to gather baseline data and ancillary information
- Collect existing usage, pricing, contract and service-related information from suppliers, and/or from client’s internal records
- Confirm the accuracy of pricing data with client – have client sign off
- Strategize, using cross-referenced data to determine consolidation or reapportionment possibilities, or determine alternative courses of action
- Look for ways in which RFP’s can be improved or restructured for future bidding
Phase I – Supplier research and analysis
- Identify possible ancillary factors, from suppliers’ point of view, which impact pricing
- Identify and qualify (based on quality, service and overall capabilities) viable alternative suppliers
- Contact suppliers individually or through our own bid process; in the alternative, solicit competitive supplier proposals, based on new RFP’s if/as required (see Phase IV of part “A” above)
- Compare product, service and pricing data between new and incumbent suppliers
- Solicit client input before final negotiations with potential new suppliers
- If client signs off on the use of a new supplier, we enter into final negotiations with incumbent and approved new suppliers
- Confirm final cost reductions offered from incumbent and alternate suppliers
- Select supplier
This is the process by which we ensure that all purchases made during the tenure of the program are for the agreed-upon products, at the agreed-upon prices and agreed-upon terms
PMA’s leadership team brings exceptional experience to developing proven methodologies to ensure the company delivers what it promised, when it is promised, right, the first time. PMA has developed a comprehensive strategic sourcing methodology that has differentiated the company from the competition. PMA’s methodology generates its revenue from a percentage of the dollars that we save our clients. The company has implemented the following Four Step Savings Process to ensure we maintain our track record for client satisfaction:
- Assessment / Data Evaluation PMA has developed a structured and comprehensive methodology to rapidly assess the current state of an organization’s purchasing environment. Through a review of current and historical AP data and personal interviews, PMA formally analyzes the overall business, current purchasing practices, current vendor arrangements, unit pricing and processes affecting the delivery of purchased goods and services.
- Strategy Development. With all appropriate data collected, PMA will meet with the client to present the current sourcing environment. PMA and team will distribute both internal and external Request for Information (RFI) to establish products / commodities provided by all vendors and price. All data will be analyzed and reviewed by the team to formulate the most efficient strategy.
- Strategy Execution. Once PMA has formalized the sourcing strategy, we will work with agreed upon vendors and launch the project which has been agree upon by the team. These strategies may include: Current vendor renegotiation, Supplier rationalization, and RFP development. PMA will act as the primary drivers to ensure the project moves forward in accordance with the agreed upon project plan. PMA will distribute all RFP and analyze subsequent responses. It is important to note that PMA will request a finance person be a member of the client team to ensure all numbers are validated prior to savings estimates being delivered to Executive Team.
- Implementation. As the sourcing strategy is executed and the desired result is achieved, PMA will assist with all new strategy / vendor implementation. This includes but is not limited to: New contract development, incentive package negotiations, implementation plans. PMA will follow through with the project until the new supplier has implemented its services, and begun to deliver identified savings.
ADDITIONAL CONSULTING SERVICES
To meet certain client needs, PMA allocates specialists to assist our clients in day-to-day purchasing operations. Ongoing involvement is most effective in areas where large expenditures occur on a case-by-case basis, as well as areas where long-term commitments are not always suitable. In this scenario, PMA personnel apply strategic thinking and cross-industry experience to ensure that the highest service levels and cost savings are ultimately achieved. This direct support function also serves as a mechanism to drive implementation of more complicated or politically charged initiatives. In this role we are able to assure new processes are followed and that end-users are supported.
Accounting Systems Analysis:
PMA not only helps our clients reduce costs in specific expenditure categories, but also looks into the systems that are used to manage expenses moving forward. Accounting systems and supply chain operations must interface in the most efficient manner. PMA looks at the supply process from requisition to delivery. The accounting systems are the key in any organization to managing your data.
Hourly Billable Consulting Services:
PMA has developed an hourly consulting service offering that provides our clients with target skill sets in several expense areas. PMA consultants work closely with organizations in developing cost cutting strategies that affect net profits.
- Telecommunication Management
- Procurement Strategy
- Accounts Payable Management
- RFP development and Negotiations
- Training of Personnel
These service offerings address critical needs facing a majority of middle market firms. Contracts typically include strategy, and implementation of services but the company may be retained for any portion of the above.
Contract / Policy & Procedural Management:
Companies in PMA target markets may have anywhere from 500 to 5,000 different suppliers being used. Some of these suppliers are under a contract while others are not. Statistics have shown us that on the average, 80% of expenditures are spent with 20% of the supplier-base which, when we look deeper, usually reveals duplications of services across multiple locations / departments across the organization. Smaller, less utilized suppliers fall below the focus of most internal studies, and therefore don’t likely have any contracts in place.
“Renegade Spending” or buying against negotiated national / global contracts can be very costly to an organization. It is only after policies, procedures, and contracts become visible across an organization, that we see a more unified purchasing front, and therefore, more efficiencies and costs savings. PMA has developed a business to assist our clients in increasing communications within the buying community.
PMA will create a “Purchasing Portal,” for companies independently from project work, or in conjunction with our full initiatives.
Audit Services
Many organizations continue to pay for services they do not need or use, or they do not effectively leverage their spending. PMA's audit services are effective in producing savings from dollars that have already been spent, and in identifying additional cost saving opportunities for the future.
Telecommunications - Audits cover local, long distance, international, cellular, and data (network) services (switched, dedicated, frame relay, etc.). Audits check for billing errors, unused lines and services, proper application of tariffs & discounts, optimal utilization of networks, and optimal allocation of service providers.
Utilities - Gas & Electric Audits Audits check for billing errors, unused services, proper application of tariffs, and optimal rate structures and usage pattems. Where state laws allow, PMA will negotiate for improved pricing with existing or altemate providers.
Freight - Audits review prior year and current year charges for billing errors, and ensure optimal (lowest cost) freight classifications & discounts. Ongoing service is available to prevent errors prior to paying bills.
Overnight Small Package Delivery - Audits review adherence to service guarantees and check for billing errors. Ongoing service is available to prevent errors prior to paying bills.
Sales Tax - Audits review sales taxes paid, and seek refunds from appropriate state agencies for incorrect and inappropriate charges.
Real Estate and Equipment - Lease Agreement Audits Audits check lease agreements, cost allocations, and escalation / deescalation formulas.
Real Estate - Tax Audits Audits review assessments and taxes paid, and seek refunds from state agencies as appropriate.
Accounts Payable - Audits review accounts payable records to determine duplicate payments, incorrect supplier payments, mis-charged sales tax, incorrect use of t~ assessment, transposition and extension errors.
Cost Recovery - Cost recovery auditing is a painless, transparent, non-intrusive way for organizations to turn accounts payable into profits.
Working with your own invoices as well as directly with your suppliers, PMA has as our major deliverable the actual credits submitted by these suppliers. What we look for includes overcharges, duplicate charges, misapplication or otherwise erroneous charges for sales tax, discount, rebate and warranty issues, and misapplied payments.