Most Companies are experiencing significant cash leakage
As a cost reduction services group, ERA has experience from over 18,000 unique projects and we have determined that 10% to 30% of cash flow is being left on the table across large expense categories.
How is this possible to be leaving cash on the table (i.e. cash leakage)?
- The goal of any supplier is to win all the business they can at the highest price while protecting margin.
- It can be impractical to dedicate equal resources to less strategic cost categories.
- Most companies lack benchmark data to adequately understand “Best Pricing.”
- Negotiating leverage is limited to company’s purchase volume.
- There are many misconceptions about Procurement Best Practices.
- It takes supplier and industry knowledge to find the best deal for your service requirements and buyers rarely have it, but we do.
What you must know about each of your suppliers
It is key that you understand each of your suppliers’ industries like you understand your own to help avoid cash leakage. You should make it a point to know your suppliers’ market trends, pressures, cycles, new developments, and alternatives. This will help you and the suppliers see eye to eye but it doesn’t stop there. Other important things to understand is their terminology, jargon, cost/price drivers, business practices in terms of contracting, and maybe most importantly you should understand their pricing benchmarks for similar companies, with similar spends, in other geographies and the true differentiation among their competitors. Contact ERA by phone or join today to learn more.
