Working for a cost and purchase management consultancy, I believe that travel agents can make average savings in the region of 20% by putting the spotlight on a range of non-core operating costs.
Here are five top tips to trim business expenditure:
Create a cost-conscious culture at work
The economic boom over the past 10 years may have affected your employees’ focus on cost control and the need to maintain long-term savings. Develop a culture where everybody in the organisation is responsible for challenging costs, from the receptionist booking a courier, to senior management reviewing their nationwide logistics provision.
Celebrate cost reductions just as you do for business wins and make staff aware that savings go straight on the bottom line by using simple examples to demonstrate their impact on profit.
Establish your costs
You may believe your costs are under control but your perceived well-kept ship may not be as leak-proof as you thought.
Examine and benchmark your costs by getting comparisons against competitors and other suppliers. Although this sort of exercise can demand significant resource – and hence is often the barrier to making cost improvements – the benefits of truly understanding your spending patterns in different areas can also
be significant, and can lead to real cost cutting.
Potential savings are great, but they don’t mean anything unless they are realised. After implementing a culture of cost-consciousness and establishing your cost base, appoint cost champions to drive the programme forward.
Be market savvy
It is vital that you are aware of the constantly changing supplier market for the costs you are examining and any developments that you may be able to capitalise on.
Keep tabs on the supplier market and review prices on a systematic basis. Compare those costs with other suppliers.
Furthermore, buy what you need and not what suppliers would like to sell you. Suppliers will often use bait-and-switch tactics to move you onto their higher margin items. For example, you might be lured in by a cheap deal initially, but it could be more expensive in the long run.
Monitor key supplier performance
Let your suppliers know that you are reviewing your overhead costs and refuse to accept blanket statements such as ‘our prices are higher because we provide superior quality and service’ or ‘our prices cannot be beaten’.
In addition to reviewing prices, work with them to establish key performance indicators that are appropriate for your business, ensuring you get good value for money. Beware of setting them higher than is actually required, however, as this will only add to the cost base.
Jettisoning suppliers should be the last consideration
Reducing costs is not just about going to a cheaper supplier. By following the tips above and working in partnership with suppliers to identify cost-cutting strategies you can, in the majority of cases, generate and maintain long-term savings without affecting or disrupting standards of service to your internal procedures or your customers.
Derek Hodd is an associate at Expense Reduction Analysts, where he works with clients to understand their needs, and approaches the supplier market to find the most suitable arrangement and price. He is a Fellow of the Institute of Chartered Company Secretaries and Administrators, and member of the Institute of Travel and Meetings.