Are SME's missing out on hidden cost savings?

Are SME's missing out on hidden cost savings?

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The modern business environment can appear very cut throat with every other company out to steal your secrets. There is a valid need to guard any information or element which sets a business apart from its rivals, however this process can make it very easy to become isolated and think of every other business as a potential threat.

Viewing all other businesses as a threat may result in many missed opportunities to reduce costs on many none value add products and services. Savings may be readily available through closer ties with neighbouring businesses situated with in the local area.

All businesses have many indirect or overhead costs which are not directly linked to the production of products. Costs such as:

  • utilities
  • waste removal
  • cleaning, stationary
  • communications
  • catering

Large organisations have begun to focus large resource on reducing these costs as they have a direct and instant impact to the organisations profit and loss.

On the surface larger organisations have the assistance of increased leverage over these suppliers that larger spends enjoy, no SMW can hope to begin capitalising on savings of this nature with a limited spend.

Although individually it is difficult to challenge the power suppliers in these areas have, however with a level of local networking the power balance can begin to shift in favour of the customer. Up and down the country there are business and industrial parks filled with SME's all operating in isolation of each other while competing in different industries, there may be a low level of communication and co-operation between neighbours when required but generally each company maintains a clear distance.

With relatively small effort, small businesses can come together and operate on a more common ground pooling resources and product/service requirements to help increase each individual businesses profile and spending power with suppliers that would usually not spend any real time and investment on securing business.

What We Suggest

As a purchasing contractor and consultant, each business I work with believe their individual product and service requirements are unique. To a limited degree this is correct, how a company operates is unique to them, however all companies purchase and use Gas, Electricity, need their bins emptying, use computer paper, pens and staples etc.

With small changes to what and how you purchase to create a larger pool of requirement with your neighbours all businesses can capitalise on 'Economies of Scale'. An individual small business electricity supply is not of great importance to any one Utilities company, however 10 companies in the same location very quickly become a very attractive customer.

Another example would be instead of each company opting to use a different stationary/cleaning material supplier each offering different brands. If 10 local small businesses pool resources and agree to purchase the same brand computer paper, pens, toilet paper etc. this becomes a very important potential customer for all suppliers to win.

In the current and future business environment it is important to maximise the effectiveness of your business, working in isolation may feel very secure and safe.

Things To Remember

Very few smaller businesses would consider setting up a facility in close proximity to a direct competitor unless there was a sizeable benefit in doing so. In general your close neighbours will not be a competitor. Even if your closest rival is situated in the next building what makes your business unique is what you produce or sell and how it is produced, not what brand of toilet paper and pens you use.


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