Our April 2013 Newsletter with Case Studies and tips for companies seeking to reduce costs and improve processes.

1. INSIDE THIS ISSUE
Cutting services not the only option for third sector
Many charities fear they have to make cuts to
maintain services, yet smarter procurement could
be the answer they are looking for.
Paper prices set to soar.
April has seen paper prices increase across the
board by 5-7% impacting on overall print costs.
Can you avoid them?
Over half of UK businesses suffering
from a culture of spending apathy
Bring your own device headaches.
Huge bills on in-game app purchases through
smartphones and tablets are causing problems for
companies without a BYOD policy.
Smarter spending a priority for the legal sector.
Recent legal sector surveys have continued to
emphasise the need for firms to adopt or continue with
a focus on cost reduction and process improvement.
PROFIT NEWS
D
oing business in Britain: A culture of
spending apathy sought to discover the
attitudes and practices of employees
(from junior executives to directors) with
purchasing responsibility and how they impact business
operations. 516 business people – across a large range
of industries including IT, retail, manufacturing, public
sector and telecommunications – were interviewed in
March 2013 for the report.
A ‘culture of apathy’
Overall, the report findings illustrate an ingrained
apathy towards smarter supply chain spending among
UK businesses, stemming from a legacy approach to
managing supplier relationships and an unwillingness
of staff to challenge the status quo.
• Alack of purchasing control – There is a significant
absence of company-wide controls and processes
and limited strategic thought towards purchasing.
- 49 percent don’t know if their business has a
purchasing process, have no process or do their own
thing when managing a supplier tender.
- 65 percent of junior management are able to make
some or all purchasing decisions with no approval
from senior employees or insight at board level.
- less than half of all companies, 49 percent, have
enterprise-wide purchasing processes indicating
an alarming lack of company-wide supply chain
control.
• A lack of regular supplier review – Through
regular supplier reviews, companies can identify
holes in the supply chain. However:
- 56 percent rarely speak with suppliers, don’t trust
them or only speak with them if there is a problem.
- 59 percent of businesses will not review suppliers
unless there is a problem.
• UK businesses are focused on cost-cutting, not
smarter spending – Organisations are thinking
short-term instead of long-term. Many changes are
reactionary rather than proactive.
- 60 percent of companies said a need to cut costs
triggers a supplier review.
• A lack of value is attributed to the purchasing
function – Purchasing very much comes as a
secondary priority to the primary job role and
therefore isn’t seen internally as important enough to
warrant investment or training.
- Nearly half of professionals asked confessed they
just use the previous price without any detailed
analysis to benchmark suppliers or don’t benchmark
at all due to a lack of time.
- a quarter of respondents say that if it were their own
money, they would be far more careful with it!
- 64 percent of sole purchasers have had no formal
purchasing training.
A Smarter Spending strategy – the future
Rob Allison, managing director, ERA, said: ‘Many
employees don’t understand the value of managing the
purse strings, or even appear to have the motivation
or board support to affect real change. A complete
culture, attitude and organisation shift is required for
companies to see operational efficiencies and increased
profitability.And more value must be attributed to long-
term smarter spending across the entire supply chain if
businesses are to find growth in the future.’
Top tips:
1. Implement company-wide supply chain
guidelines. These should include clear company
processes and policies for employees and for
reviewing suppliers – organisations
need to answer when, why, how
and who makes these supplier
review decisions.
2. Develop and enforce an
integrated approach to
purchasing decisions. Present
quarterly supplier reviews to
the board. These should not
just focus on cost reduction
but metrics such as quality
control, supplier relationship
and company reputation.
3. Create a key skills
framework for people
responsible for frontline
purchasing decisions.
Invest in the purchasing
function through ongoing
and regular training to be
able to implement best
practice purchasing.
4. Implement a cost management strategy. Ensure
you have the expertise in-house or via an external
source to devote time to the purchasing process and
build effective long-term supplier relationships.
A report commissioned by ERA, shows that many companies are suffering from a culture of spending apathy caused
by employees failing to control purchasing, review suppliers or challenge the status quo unless there is an issue.
Industry report finds clear supply chain failings within
UK business which hamper organisational effectiveness,
damage competitiveness and restrict growth.
Doing Business in Britain:
A culture of spending apathyA smarter spending report – highlighting how
supply chain failures are hindering growth of
British business in tough economic times
Doing Business in Britain:
A culture of spending apathyA smarter spending report – highlighting how
supply chain failures are hindering growth of
British business in tough economic times
Download your free copy of the report
www.smarter-spending.co.uk

2. April has seen a 5-7% increase in paper pricing which may
impact your overall print costs. Can you avoid them?
EXPERT NEWS - Bruce Murray
Paper prices set
to soar
F
ollowing the latest round of paper
manufacturers’ price increases, paper
merchants are waiting to find out if they will
be forced to pass the increases on to their
customers.
In a move to correct perceived unsustainable prices,
Sappi Fine Paper Europe has increased its prices for
all coated fine paper sheets and reels by 5-7% from 1
April 2013.
The company has blamed the increase on the
‘unprecedented rise in input costs such as pulp,
chemicals and transport costs which entirely outstrips
the benefits from our price improvements and cost
reduction programs so far.’
This will be the second time this year that Sappi has
raised its prices for coated fine papers which the
company said it was ‘obliged’ to do ‘as current price
levels are unsustainably low.’
Meanwhile,Arjowiggins Graphic announced that is has
also increased its wood-free coated papers price by £40
per tonne, equal to a rise of approximately 6%, from
1 April. Maine Gloss, Chromomat and Satimat, which
are exclusively distributed in the UK by merchant
Elliott Baxter, will be affected by the increase.
Arjowiggins Graphic national key account manager
Julian Long blamed rising costs of transport, chemicals
and energy as the key factor in driving up paper prices.
However, some stockists are still waiting to be
officially notified of the price increases, although the
consensus was that once the rises are made official,
merchants would be forced to pass on the full impact of
the increases to buyers.
Scott Barclay, director of procurement at Paperlinx,
which stocks Sappi’s Hello, Club and Core Uncoated,
all of which are affected by the price rise in April, said:
“In reality, if a mill does put up their prices, we don’t
have the ability to swallow these price increases into
our margins. We just don’t operate at that type of profit
level. The likelihood is that we will have to follow suit.”
He cited the example of Arjowiggins Creative’s
decision to push up the price of its premium quality
paper Conqueror by 3% at the beginning of January,
which the merchanting group had been forced to pass
on to customers.
On the upside, Metsa Group confirmed in its
recent year-end results that it did not anticipate any
“significant price changes” to its uncoated paper and
that coated paper prices were expected to fall in the
coming months.
With this mixed picture, now is possibly an ideal time
to review your printing expenditure and the potential
impact that any paper price increase may have on your
printed material costs.
But it is important to bear in mind that the paper cost
of any printed work is only the partial cost and any
increase should only be applied to this area alone. Pre-
press, the printing process, finishing and distribution all
contribute to the overall cost of the work. Therefore, it
is vital to know what percentage the paper element is
of your total cost.
Take the opportunity to look at the alternatives, in
terms of different materials, paper weights and finishes.
Sometimes a change in the brand of the paper can result
in instant savings.
Charities should
not rely simply
on service cutting
strategies to survive
M
any organisations fear they may have
to cut activities, jobs or even close
altogether. However, along with more
traditional responses to these pressures,
smarter procurement could lead to dramatically
improved finances.
Whilst some of challenges aren’t new, CEOs and
Finance Directors (FDs) in companies and charities
are once again facing the task of choosing between
contraction and control initiatives for survival
today, against investing in an effort to ensure growth
tomorrow. Sometimes, available resources or aversion
to risk allow only the contraction option.
Expense Reduction Analysts commissioned an
extensive survey of FDs across a wide range of
organisations throughout the UK and Ireland. The
research has shown that many have neglected the
importance of procurement and the potential financial
benefits that may flow through this function.
Business strategies for turbulent
times and beyond
Many strategies employed in difficult times are high
level choices between retrenchment or, if resources
allow, investment. However, these strategies don’t take
into account an organisation’s procurement strategy, or
the thinking behind it. The Expense ReductionAnalysts
research supports the theory that the psychology
behind procurement – especially the mind-set of the
FD when tackling tough business problems – has a
major influence on an organisation’s behaviour and its
financial performance.
In fact, the majority of FDs surveyed (77%) stated that
their company would default to a defensive cost-cutting
approach when dealing with financial difficulties, while
only 4% would look to increase spending on new
products and services. This defensive approach and
lack of innovation by organisations is a natural reaction
and unsurprising given the current economic climate,
but it is not the only option.
Understanding of procurement
at board-level
Worryingly, our research found that almost half of the
FDs stated that their company discussed procurement
at board level only once a year or never. And it’s clear
from this statistic that many boards don’t appreciate
the impact their procurement strategy, or lack of it, is
having. Until this changes, FDs will find it extremely
difficult to change procurement practices and improve
spending habits to help free up cash.
Lack of internal procurement skills
Given the lack of board-room importance placed on
procurement, it’s no surprise that our research found
that four out of five organisations do not have a
specialist procurement team or individual, while more
than one in three leaves responsibilities to individual
departments.
Inefficient supply chain partnership
The management of the supply chain is another key
component impacting business performance. And
although a successful supply chain is dependent
upon mutual trust and understanding, only 21% of
FDs surveyed viewed their suppliers as partners.
Challenging suppliers and testing the market place often
leads to better long term and efficient relationships.
Conclusion
Charities should not rely simply on service cutting
strategies to survive. A close but challenging
partnership with suppliers, married to a culture of
smarter communication with trustees, employees
and the supply chain, is more likely to free up cash,
drive service growth and deliver more sustainable and
efficient organisations.
It is possible that 2013 could be one of the toughest
years the third sector has ever seen, with public spending
cutbacks and pressure on donations forcing many to dip
into reserves to maintain their service provisions.
Expert news Simon Dodson Nick Robinson

3. Expense Reduction Analysts Success Story
AM saves the UK energy; Expense
Reduction Analysts saves AM money
F
ormed in 1973 as a family-run business,AM
Energy Solution (formerly AM Insulations)
is one of the UK’s largest providers of
insulation services, working with home
owners, construction firms, local authorities, housing
associations, registered social landlords and energy
suppliers to take steps to reduce the UK’s carbon
footprint. With over 230 employees across the UK,
AM now carries out approximately 70,000 energy
saving measures on properties every year.
“He was immediately receptive,” says Bernard McKay,
Consultant with Expense Reduction Analysts, of his
first meeting with Ian Holland, Finance Director at
AM, which took place in August 2010.
AM was growing quickly and with no procurement
manager yet in place, Ian Holland saw the benefit of
Bernard McKay’s proposition. It was soon agreed that
Expense Reduction Analysts’ Pete Bramhall would
look at AM’s expenditure on Waste, Pritesh Patel at
their Telecoms spend, Richard Clayton at Utilities and
Phil Howarth at Water.
Bernard McKay takes up the story: “Each of these first
round of categories produced very good savings. With
Waste, the initial savings were relatively low, but we
additionally proposed some internal changes in the
handling of waste, and these had a significant impact.
With Utilities, we originally proposed to perform this
on a consultancy basis, but Ian was reluctant, since at
that point he had seen no proof of our expertise. We
therefore worked on a contingency basis for two years,
and then, having proved our worth, moved over to a
fixed-fee consultancy basis, which delivered best value
for the client.”
“Pritesh’s work on Telecoms
was a real highlight”
Expense Reduction Analysts’ specialists can usually
uncover good savings through their category expertise;
on occasion, however, their work simply provides a
valuable healthcheck. Analysis of AM’s spend on
Fuel revealed that they were already buying wisely
and Expense Reduction Analysts was able to provide
valuable peace of mind in that area.
It was the Telecoms category that provided the most
significant savings. Pritesh Patel, Telecoms Specialist
at Expense Reduction Analysts, gives more detail on
this category: “I was able to give AM some ideas that
they had not previously considered, such as different
ways of managing their mobile phone contracts. In all,
the real value for AM is that, in addition to saving
them money through the initial consultation, we are
providing them with far greater visibility of their
expenditure through our ongoing reporting. Together
with our practical advice, this gives them far greater
control and enables them to drive down their telecoms
costs even further.”
Having seen the value of the Expense Reduction
Analysts’ proposition in these initial projects, Ian
Holland asked Bernard McKay to take on areas of
expenditure that were even more central to AM’s
work, namely Buildings Materials and PPE.
Bernard McKay again: “Steve Clamp looked at
Buildings Materials, and presented AM with a matrix
of options. When implemented, the proposed changes
should see the number of suppliers streamlined from
22 to 7 – including two new suppliers – and the
client enjoying significant savings and, importantly, a
simplified set of supplier management procedures.
“Malcolm Tait tackled PPE, and, after his usual
thorough analysis, he recommended that AM stay
with the incumbent supplier, but on the significantly
more beneficial terms that he had negotiated.”
“Expense Reduction Analysts have
delivered significant savings in almost all of
the areas I have asked them to examine.
In particular, their recommendations on our
Telecoms procurement stand out and prove
their ability to think outside the box”
Ian Holland, Finance Director, AM Energy Solutions Ltd
Ian Holland, Finance Director at AM, sums up the value of Expense Reduction Analysts’ work:
Category Saving(%)
Waste 23%
Telecoms Fixed 37%
Telecoms Mobile1 65%
Telecoms Mobile2 52%
Utilities 39%
PPE 13%
Buildings Materials 18.5%
Water 26%
Table of Savings
“I met with Bernard at a time when we were growing rapidly
and needed to keep as close an eye as possible on costs.
His team provided expert analysis of our expenditure, and in
almost every case saved us considerable sums of money.
I must pay particular tribute to Pritesh Patel’s work on
Telecoms: he has been invaluable in his analysis, his ongoing
reporting, his advice and his ability to think outside the box.”
Children and adults are running up huge bills on supposedly
free computer games sold as apps through smartphones
and tablets. Games like Angry Birds, Plants V Zombies and
The Simpson’s are offered as free downloads.
EXPERT NEWS - Brian Holmes
Companies at risk from IAP’s
But what else might be innocently downloaded? Is
there a virus or spyware hidden in that game? How
secure are your tablets and do your employees know
the risks of unsupervised use?
The biggest risk to the enterprise is not the company-
provided smartphones or tablets as these should
be reasonably secure, the dangers come from the
unauthorised device. It takes seconds to move a SIM
card from a secure device to an unsecure one, leaving
the enterprise network unprotected.
All companies must have a BYOD (Bring Your Own
Device) policy even if it just prohibits the use of non-
company supplied devices.
H
owever, once children are playing
with them, they are hit with pop-up
advertisements for so-called ‘In-App
Purchases’ – IAPs. These might be to
purchase coins, additional content or extra powers to
allow the characters being controlled to go further and
deeper into the game.
These payments are taken automatically from the credit
cards of the adult owners of the tablet or smartphone
via, for example, an iTunes or Google Play account.
Often, the first time a parent finds out about the
purchases is when their credit card is rejected at a check-
out till or they find a black hole in their current account.

4. EXPERT NEWS - Jason Adderley
Expense Reduction Analysts Success Story
Significant savings and process
improvements for HT Group
A
lex Maby, Group Finance Director, HT
Group, who are the country’s leading
pawnbroking company with over 180
HT outlets wanted to explore effective
procurement to ensure best value was being achieved.
Following a meeting with Paul Davidson and Nigel
Burnip of ERA, Alex felt the offering was a ‘win-
win’ arrangement and subsequently engaged a team of
ERA’s specialist procurement.
Tom Cooper, who has over 20 years’ experience in
telecoms advised HT on the best time to end the
contract with their supplier, preventing an automatic
rollover and gaining a substantial credit payment. By
leveraging Tom’s expertise within the market place
HT were able to benefit from savings of 47%.
Peter Randall and Peter Lee were appointed to review
HT’s arrangements for promotional printed balloons
and gases used in many stores. The consultants
produced a detailed review and sourced a supplier that
could provide the same quality of balloons for a lower
price. In addition, they identified a new supplier to
fulfil requirements for helium and deliver the supplies
straight to HT’s stores.
Previously, HT’s Head Office was acting as a
purchasing function for all of the stores which was
taking up valuable time and resource, but was providing
head office with the ordering control they wanted.
Sue Cooke, expert in office supplies, was brought to
implement a system that would allow the same level
of control without taking the time and effort of head
office staff. Sue sourced a supplier offering a saving of
22.2%, an online ordering system and nationwide next
day delivery directly to all of HT’s stores.
Nigel enlisted Keith Copestake who has over 25 years’
experience in the office products and print category
to improve HT’s process for ordering business
print materials .Keith identified a new supplier who
provided an online ordering system. As well as being
a convenient and more practical way of ordering, this
has completely alleviated any distribution costs as the
supplier is already making deliveries to the various
stores.
Nadim Vanderman, who joined ERA in 1998 and has
successfully completed over 60 postage projects, was
enlisted to review mailing arrangements throughout
the 200 sites and head office. Nadim suggested using
Royal Mail’s latest online technology to distribute
letters. This service allows staff members to log in and
specify their mailing requirements for each month.
In the electricity category, HT chose to engage
ERA’s service on a 12 month consultancy basis as they
were receiving a fair market price for their electricity,
but still felt that Nadim’s category expertise would be
of great value. Nadim was able to make considerable
improvements by working with the electricity supplier
to align all of HT’s contract end dates so each store’s
contract didn’t have to be renewed individually.
In addition ERA negotiated the free installation of
SMART meters across all sites. These contain an
individual SIM card that sends automatic meter
readings to the supplier, providing accurate invoicing,
removing the hassle of manually taking readings and
allows HT to manage their electricity consumption.
ERA consultant, Ian Morrison with over 30 years’
experience in facilities management was appointed to
review HT’s arrangements for cleaning and janitorial.
Staff had been managing the purchase of these items
by store. Ian explored the client’s usage and product
specifications and found that the new supplier for the
office supplies and print could also fulfil the client’s
needs for janitorial items.
In addition, Each of HT’s sites have different safety
requirements including smoke alarms, fire extinguishers
and security alarms. Ian assessed a number of
installations, compared these to the security supplies
market and advised on a suitable typical security
solution. Ian then worked with the existing supplier to
configure the contract, adding requirements that were
not previously being included. Ian used his extensive
industry knowledge to negotiate with the supplier to
achieve a lower price with an improved service.
HT group have made the best use of ERA’s
outsourced management service and have gained
exceptional financial results and process improvements
across the company.
“We have gained a great confidence in what we
are spending money on thanks to the experts
review. We now have a structured procurement
process with the correct suppliers and measures
in place; we know that we are not being
overcharged and that our suppliers are keeping
their prices competitive to retain our business.”
Alex Maby, Group Finance Director
Category Saving(%)
Communications - Landlines 35.6%
Merchandising - Gas Balloons 28.8%
Office Supplies 22.2%
Print - Business 44.0%
Print - Marketing 41.8%
Postage - In Store Head Office 23.1%
Utilities - Electricity SMART Meters £27,500
Facilities - Fire Security 19.4%
Consumables - Janitorial 30.6%
Insurance 15.4%
Average saving 24.1%
Table of Savings
Legal sector must continue to focus on
cost reduction and process improvement
Recently there has been a series of legal sector surveys that have continued to emphasise the need for firms to adopt,
or to continue with, a focus on cost reduction and process improvement during 2013.
T
he Law Management Section (LMS)Annual
Survey, which examines the financial health
of law firms across the UK, confirmed that
Practice fee income increased by 3.6% in
2012, compared with more modest growth of 1%
in 2011, and average net profit per equity partner
climbed from £112,549 to £114,853, a rise of 2%.
More interesting were the survey results which
revealed that the number of support staff per fee
earner remained steady at 0.61 and the median spend
on non-salary overheads per fee-earner was £37,992,
compared with £37,831 in 2011, a nominal increase
of 0.4 per cent.
Naturally, this real terms fall in costs is to be
welcomed – but at Expense Reduction Analysts, we’d
view anything but an actual reduction in non-salary
overheads as a failure.
Legal market management recruitment consultancy
Totum found that a fifth of firms expected to increase
salaries for business support professionals by more
than 3% in 2013.
And finally, BDO found that almost half of law firm
partners think they should be paid more than they
currently are. 69% of partners expected average profit
per equity partner to increase over the next three years.
BDO goes on to suggest that such expectations will
drive further merger and acquisition activity in the
forthcoming year, concluding that, “If the majority of
partners think they should be paid more, then the only
way to pay more is if the firm generates more turnover
and more profit.”
Of course, at Expense Reduction Analysts, we don’t
necessarily agree that turnover growth is the only way,
and we would suggest that legal sector firms place
greater importance on establishing smarter spending
strategies from the boardroom down, to ensure that
they remain competitive over the next twelve months
and beyond.