Three Hidden Procurement Costs To Be Aware Of
Contributed by AFFLINK.
While most cleaning contractors and building managers focus on the "sticker" price of cleaning solutions, cleaning tools and equipment, office supplies, etc., the hidden costs of procurement are often overlooked.
"Significant cost savings are possible when managers take a more strategic approach to procurement," says Michael Wilson, vice president of marketing for AFFLINK "These hidden costs can be very significant."
Three of the most common overlooked procurement costs contractors and managers should be aware of are:
Receiving and stocking.
Most contractors/managers do not even consider how much it costs to receive and stock orders. Based on industry standards, it can cost $5 to $10 to receive an order and an additional $1 to $2 to stock it; this covers time and labor. Savings are possible by placing large orders.
Placing an order.
Costs increase significantly when placing orders over the phone or by fax. According to APQC, which develops best practices to improve company performance, ordering by phone or fax can cost $6 to $50 per order. "The best way to reduce these costs is taking advantage of e-commerce opportunities," says Wilson. "Then, these costs can be reduced by as much as 75 percent."
While more contractors and managers are aware that it costs money to process an invoice, many have not sought ways to reduce this expense, according to Wilson. A small to medium-sized business takes about six to 16 days to process one invoice, which costs from $6 to as much as $12.00 per invoice when labor costs and processing fees are calculated. Consolidating purchases on one invoice helps reduce these hidden costs.
"All of these costs increase if ordering for several locations," adds Wilson. "Consolidate, cent ralize, and purchase in bulk; this will help minimize these hidden costs."
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