An Alternative Approach to Reducing Non-Core Operating Costs Without Impacting on Quality
Post Covid19, finance directors in both corporates or SMEs alike are going to be returning to their places of work and aiming to provide a healthy workspace for people. Inevitably, this is going to require additional expenditure at a time when the business may be facing unprecedented pressure to reduce costs; particularly in non-core activities such as workplace and facilities services. Yet there will be a demand from people, and a responsibility from leadership to provide more intensive or different levels of services, by example a regular programme of ‘deep-cleans’ for the organisation.
You may be one of many organisations that has used traditional procurement methods to reduce non-core operating costs. Typically, this has centred on regularly tendering individual services to reduce unit costs. While this approach may have been largely successful, there will come a point in time where no meaningful reductions can be achieved without serious impact on service quality and compliancy, which in turn could have an effect on the core business.
“ You have reduced non-core service costs using traditional procurement - What do you do then? “
Multiple service providers can be difficult to co-ordinate and they often have little incentive to collaborate as they may well be competitors. Traditional outsourcing and facilities management has had mixed success with a growing trend back towards in-sourcing in some sectors. The nett result being, that the overall service levels and support to the core business activities can become fragmented and costly to manage.
“ Traditional outsourcing & facilities management has had mixed success “
Alternatively, some organisations have de-centralised the responsibility for management of these services, choosing to spread the individual service lines across the management team as an “add-on” to their day job. Although good deals may be struck by a supporting procurement department, business managers may not focus as closely on these non-core services as those that make up their main role. In the medium to long term, this often leads to a situation where there is no real day-to-day control of the service cost or compliancy. So, instead of saving money, the organisation may actually end up paying more than it needs to, especially for additional or ad-hoc work.
“ Slim down, but keep control; a big in-house service team is a thing of the past “
But despite the thick layer of management speak, the idea of integrating delivery and procurement of a range of non-core services is starting to filter through. A number of organisations have steadily slimmed down over the past few years, with the management of property and facilities services becoming a one or two person operation; a big in-house team being a thing of the past.
“ Co-Sourcing is about collaboration to reduce costs, deliver quality and ensure compliancy “
A move towards Co-Sourcing as a collaborative solution to reducing costs, ensuring compliancy, enhancing service delivery and reducing the internal management burden, may be a cost-effective option for finance directors and leadership teams to consider, and with modern service technology this approach is available for SMEs and Corporates with single or multi-place facilities:
Integrated Team: Co-Sourcing is about business collaboration and resembles a joint venture approach, but without the need for a complex commercial agreement or structure. The co-sourcing solution aims to co-locate the service team from a specialist partner such as Enlight Group, so that it becomes an integral part of your organisation, with no additional overhead cost. This means that you get expert service management, whilst allowing you to maintain that ‘slim-line’ operation.
Joint Venture Principles: The approach centres around establishment of a Joint Executive Board or JEB with executive representation from each organisation, to ensure on-going alignment with corporate objectives and effective performance.
Investment in Service Technology: Modern service technology is combined to offer a single hub for service management, compliancy management and e-procurement. It also provides customers with transparent cost control, enabling real-time communication, reporting and super-effective task management.
Service Partner Network: Your operation can tap into an alternative service partner network, where non-core and commodity service costs are constantly benchmarked. Even these service partners can be co-sourced, often being made up of the best service partners from each respective organisation, to create a custom operation. The service partner network is also regionally focused as opposed to the national solutions often provided through ‘buying agencies’ or ‘outsourcing’ organisations. This establishes a good level of quality control, continuous improvement, competitive leverage, localised service and overlap of service partners to ensure good levels of delivery.
The big benefit: Being that the right co-sourcing partner will do all of these things, whilst guaranteeing costs savings and managing delivery of your non-core services – unlike the ‘buying agency’ approach, which will simply procure the services, but leave it down to you to manage them; allowing upward cost creep over time.
‘ Double digit cost savings can be achieved through our co-sourcing model for workplace and facilities management services ‘
The smart organisations are not just jumping onto the typical off-the-shelf outsourcing or facilities management bandwagon. They are looking at their business and working out just what is an appropriate structure for their non-core activities that will provide people with a safe place to work and save money for a sustained period; one that will also ensure compliancy and service performance. Co-sourcing represents joined-up thinking and a collaborative approach between focused organisations that can provide a custom solution for this business challenge.
About the Author:
Frank Rodriguez is Executive Chairman of Enlight Group and has over 30 years of experience in the outsourcing and facilities management sector having worked globally for leading service organisations. He has won numerous business awards in this field, including the prestigious National Entrepreneur of the Year, FT Fast Track and European Hot 100 awards. He has pioneered co-sourcing as a ‘next generation’ integrated service solution and has chaired numerous industry or academic forums for outsourcing, workplace services, facilities management and associated service technology.
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