Savings rationalization: What would you sacrifice to maximize savings?

Posted: 01/03/2019 - 02:14
As we move through the holiday season, competition of all sorts is becoming prevalent. Big department stores and smaller retail chains all have their special deals in place and offer a variety of products and solutions to meet spikes in customer demand while racking in the big dollars. They promote discounts and incentives on brand-name products while other shops offer a more generic version of the same items at less than half the price. Consumers are left with a big decision. What is most important to you – quality or cost
For Halloween you buy candy for yourself, your kids and other trick-or-treaters. Do you keep the good stuff, like Reese's cups, for your home, and hand out the generic peanut butter milk chocolate cups? Or do you share the big name candy with everyone and get recognized as the house to visit? During the holidays are you buying Apple, Nike, Barbie, Hot Wheels and LEGO toys? Or do you purchase private label technology products, tennis shoes, fashion dolls, build-on bricks and dollar store play toys? Does it really matter? 
For a business owner, purchasing a product means taking a long look at both cost and quality. You measure quality to ensure your requirements are met and guarantee that the product will maintain its integrity for the necessary period. At the same time, you work to confirm that pricing is market competitive. Meeting your cost and quality needs, however, does not necessarily mean purchasing from a global player, an industry recognized supplier or even an original equipment manufacturer (OEM). As an example, let’s look at the office supplies category. 
Office supplies are considered a universally sourced indirect category. It is not only commoditized but should be simple to source, easy to maintain and provide competitive pricing. As someone who has sourced this “commodity” for hundreds of clients over 15 years, I can tell you most companies have little to no policy in place when it comes to selecting their suppliers. They also tend to lack processes for maintaining and monitoring their core item purchases. As a result, usage is all over the place, duplicate purchasing runs rampant and company dollars are wasted left and right. Buyers also often neglect to ask about substitute products that might come at a reduced price.  
Without making this a how-to guide for sourcing office supplies, here are three considerations buyers should take into account when developing a contract list of supplies and approving product selections for end users within various office supply categories: 
What is the product being used for? 
  • Pens, pencils, notebooks, calculators, spoons, plates, tissues…these are just a few basic supply or breakroom items that serve a simple, everyday purpose. A pen is used to write, spoons are used to eat, etc. Therefore, you probably don’t need seven different black pens from three different manufacturers or a crate of Kleenex with the same specifications as off-brand facial tissues.  
Who is the end user? 
  • Oftentimes, more costly products get purchased to satisfy the requests of VIPs and management teams. Pleasing these resources could prove expensive, but most end users don’t put much thought into something like the color of their notebook or the manufacturer of their stapler. Utilization audits and validation should allow for adjustments to the business profile and help identify opportunities to implement substitutions. While some pushback is inevitable, most team members will recognize that getting the job done well means much more than leveraging the priciest equipment. No one needs a rose gold stapler to match their phone.  
If the item is being used in conjunction with another product, is a specific item required? 
  • Paper and toner/ink products can be tricky. While the category generally offers savings aplenty, I would always recommend conducting tests before making a commitment. Most suppliers are willing to make this concession. While remanufactured or supplier-brand products generally meet standard requirements and produce the same results as OEM alternatives, their success is not guaranteed. Certain copiers, printers and fax machines will struggle when paired with these items. This possibility, however, should not deter you from engaging the supplier to validate functionality and test out inexpensive products.  

It all comes down to balancing end-user experience with product viability. You want to identify products that will meet your team’s needs without saddling you with unnecessary costs. I am not recommending buying the cheapest product across all categories, but never forget that earning recognition and pleasing everyone will have an associated cost. Most times, it’s not unlike holiday shopping. Will five-year-old know the difference between a Hot Wheels car or another shiny toy carProbably not


About The Author

Leigh Merz's picture

Leigh Merz is a Senior Consultant for Source One, a Corcentric company specializing in wireless/mobility management and optimization. Leigh bridges the knowledge gap between IT and the supply base to identify best-in-class partners and tailored strategic sourcing solutions. As a trusted resource, Leigh frequently collaborates with all verticals in an organization, from the C-Suite to the day-to-day stakeholders. Beyond her expertise in telecom, Leigh is Source One’s go-to resource for small parcel sourcing engagements.  She also frequently publishes thought leadership on topics including small parcel, telecom and office supplies sourcing.